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Can't pay, must pay

Daniel Nassim examines the devastating impact of 10 years of the debt crisis in Africa and Latin America

Ten years ago, in August 1982, Mexico sparked the third world debt crisis when it announced that it could no longer repay its debt to the West. The debt crisis is little discussed today. Yet its impact on the third world has been far worse than that of the Western planes, tanks and missiles which destroyed Iraq.

Over the past decade, Western governments, banks and international institutions have imposed harsh terms on third world countries to ensure that they repay their debts. The peoples of Latin America and Africa have experienced a permanent regime of austerity, as a leading Western credit rating agency coyly describes:

'The key effect of the debt crisis has been a profound breakdown of routine economic norms in debtor countries. When a country must operate in circumstances equivalent to permanent bankruptcy reorganization, the economic behaviour of its citizens is bound to shift. To satisfy creditors, wealth must be relinquished, perhaps for reasons perceived as illegitimate, and without the promise of reward for such sacrifice.'

In other words, the third world has to tighten its belt still further to pay money to Western bankers and governments. In effect, the poorest people on Earth are subsidising the life-styles and economies of the richest. The result has been a massive shift of resources from the third world to the West. According to the UN: 'In 1983-9, rich creditors received a staggering $242 billion in net transfers on long-term lending from indebted developing countries.' (Human Development Report 1992)

Such figures are so large as to seem meaningless. Who can visualise the $1.4 trillion dollars that is owed by third world countries to the West? Yet this burden has a very real human effect on the lives of billions in the third world. The UN estimates that 2.3 billion people lack access to sanitation, 1.3 billion people lack access to safe water, and 1.2 billion barely survive in absolute poverty. It is truly the arithmetic of death.

Sub-Saharan Africa is the worst affected. The Gross Domestic Product (GDP) of 450m people is the same as that of Belgium (10m). Food shortages are widespread, clean water is scarce and infant mortality is high. Each year 150 000 African women die and a similar number suffer permanent disabilities as a result of problems in pregnancy and childbirth. An estimated 200m Africans have chronic malaria.

In some ways the situation of Latin America is even more shocking. During the seventies, the industrialising countries of Brazil, Mexico and Argentina were held up as models of capitalist development. But in the eighties GDP per person in the region fell by 11 per cent. During this period Chile - ruled by one of the most brutal dictatorships in the world - was regarded as the model debtor. The only country to record consistent positive growth was Colombia - thanks to the drug barons who run most of its economy.

Despite the common perception in the West, such poverty does not spring from 'natural' causes. It is not caused by African culture, a poor climate or corruption. It is primarily a product of the way in which the West has bled the third world, particularly through the forced repayment of crippling debts.

The debt crisis has played a large part in the spread of disease in Africa and Latin America. One of the most common ways of raising funds to pay debt is by cutting public spending. This in turn leads to reductions in vaccination programmes and more polluted water supplies, which allow diseases to spread and breed much more easily. That is why there have recently been the first epidemics of typhoid in Latin America this century.

Indeed all of the 'solutions' to the debt crisis ultimately involve an attack on the living standards of the mass of people in the third world. Public spending cuts have meant mass redundancies and an end to subsidies on staple foods. Real wages have been eroded, falling behind hyper-inflation. Imported goods, paid for with scarce foreign exchange, are only for the rich.

If the impact of the debt crisis is so terrible, why is this issue which once preoccupied the world's top bankers so little discussed in the West today?

The fact is that Western banks and governments were only ever concerned about the third world debt crisis inasmuch as it was a problem for them; they were never much interested in the dire problems facing the impoverished masses of Africa or Latin America. Seen in this light, it becomes clearer why the third world debt crisis has dropped off of the West's economic agenda. First, the Western financiers have managed to limit the damage it does to their accounts; and second, they have become preoccupied with other debt problems much nearer to home.

The various Western 'plans' for third world debt have been designed to bail out the banks rather than third world countries. The basic strategy has been to shift as much of the problem as possible on to the peoples of the third world, by imposing harsh austerity programmes through the International Monetary Fund and World Bank. The demise of the Soviet Union has given the West a freer hand to pursue this strategy in the third world than it would have had a decade ago. A couple of years ago, the Financial Times felt able confidently to note that the banking industry was 'past the worst of the third world debt crisis, which was itself the gravest danger facing it since the last war' (9 May 1990).

In the current slump, the attention of Western banks has also been diverted by a huge bad debt burden closer to home. Collapses such as those of the Maxwell empire, the Bank of Credit and Commerce International, the Heron Corporation and Mountleigh have all left the banks saddled with bad debt. Olympia & York, the Canadian company that owns Canary Wharf, alone owes as much money as Peru and almost twice as much as Bangladesh.

While Western capitalists try to extract the maximum repayments from the poorest countries on Earth to help finance their domestic crises, every day the third world is witnessing the economic equivalent of the Western massacre of Iraqis on the road to Basra.

Reproduced from Living Marxism issue 47, September 1992

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