Europe should learn from Argentina's experience of fighting off vultures, before it's too late
Last year we won a campaign against what we call vulture funds - companies that buy up defaulted developing country debt cheaply in order to sue the country concerned for the full value of that debt. These companies have blighted countries like Democratic Republic of Congo, Zambia and Liberia for years, threatening to drain their already depleted treasuries in order to make a substantial profit.
The day before the British Parliament was dissolved for the 2010 election, parliamentarians passed a law that effectively made such activity impossible against low income countries in UK courts - at least on the basis of old debts.
Made permanent two months ago, the law contributed to vulture funds backing off from a case they brought against Liberia in the UK last year. What could have cost Liberia $40million ended up being settled for $3million - good news for one of the most impoverished countries in the world.
The British law against vulture funds is a world first, but it is only one small step towards a more just debt system. As things stand, the law protects up to 40 very poor countries. But dozens more indebted countries from Ecuador and Peru to Vietnam and Tajikistan, not to mention Greece and Portugal, are not protected by the law.
Finance is able to go on profiting from a country's debt crisis. And it's something Europe might need to wake up to pretty soon.
Last month a case against Argentina in a UK court highlighted this need for further change. A vulture fund called NML has been after Argentina for years. NML is a subsidiary of Elliott Associates, a US hedge fund that pioneered 'vulture fund' activity by winning a case against Peru in the 1990s, getting back 400% what they paid for Peru's debt.
Argentina carried out one of the biggest defaults in history back in 2001 when the people of that country decided they'd had enough of implementing IMF policies which were only deepening their crisis. As an aside, activists had been pushing for Argentina to have some of its debt cancelled for many years, regarding it as illegitimate. The country first became indebted under the brutal dictatorship of the late 1970s and early 1980s, a period is known as the 'dirty war' in Argentina, when 30,000 people were 'disappeared' and loans poured into the military, speculation, capital flight and interest payments.
In any case, default was undoubtedly the right thing to do. After several years of stagnation Argentina's economy started growing within a few months.
Even when right, default is never pain-free. Argentina has spent many years convincing its creditors to accept a write down on their debts - essentially accepting they will not get all of their money back, and agreeing to a restructuring under which they will get some of it back.
Vulture funds have prolonged this difficult process significantly. In fact vultures never risked losing out in a default because they only buy debt cheap after a default has already occurred, or at least when it's in sight. They then harass the country concerned to pay up, even while other creditors accept a more reasonable approach.
NML, based in the Cayman Islands, has been harassing Argentina through foreign courts for years. It claims Argentina owes it for bonds which it bought for only half their face value. Last month it won a stage of its case in London, when the UK high court ruled that Argentina's state immunity cannot be used to prevent NML from enforcing previous court judgments against the country.
NML is part of a lobby group called the American Task Force Argentina which is trying to change US law to give more protection to the vultures. Their activities include pressuring the US Government to ensure no World Bank funds are given to Argentina and trying to throw Argentina out of the G20. In other words, they aim to capture US foreign policy in order that this handful of creditors get paid.
Argentina's problems today could well become Europe's problem tomorrow. A recent article claims that hedge funds are buying up Greek debt on the so-called 'secondary debt market'. Just as in the NML case, Greek debt is currently selling for 50 percent of its face value. The vultures could make a lot of money - and if Greece does default as seems almost certain, they will hound the country for years to come.
There are solutions to these practices, but they involve governments taking action which would protect people from the unscrupulous demands of vulture investors. This in turn means challenging the notion that the rights of finance trump the rights of people.
A piece of legislation proposed by Congresswoman Maxine Waters in the US House of Representatives in 2009 would have capped the profits vultures could make on country debt to a certain percentage of what they paid for the debt. This would mean the type of legal activities vultures engage in against Argentina would be unprofitable.
Another solution which has been on the table for many years is the idea of a Debt Court - a neutral body at an international level which could write off debt which is unjustly contracted or is unpayable. Again, such a body would have the effect of making future loans more responsible because of the risk that irresponsible loans will not be paid back.
One way or another we must move the balance against the 'right of finance', towards the right of the people. This has been a serious matter for developing countries for many years. As the European crisis lurches into default, it's time for people in the developed world to make sure their countries' debt does not become rich pickings for the most unscrupulous of companies.
This article first appeared on the Huffington Post UK.
Tuesday, 2 August 2011
Debt audits and a new economic vision
It will come as no surprise to the hundreds of people gathered for a conference I have just returned from, that Greece’s ‘bailout’ package agreed 12 months ago has failed to provide a solution to the country’s debt problems.
Organised by an unprecedented cross-section of Greek civil society, the international event launched the call for Greece (and now Ireland) to open their debts to the people of those countries for a public discussion as to how just and legitimate those debts really are.
Campaigners from Brazil, Peru, the Philippines, Morocco and Argentina told Greek activists to 'stand on their shoulders’ and not go through 30 years of devastating recession at the behest of international institutions like the International Monetary Fund.
The burgeoning European movement in opposition to debt repayments and austerity is making concrete links with groups from the global south, and it expresses a confidence and rationalism a million miles away from the governments of Greece and Ireland, which have followed policies which are punishing ordinary people in order to repay reckless bankers.
It is simply not possible that the policies being inflicted on Greece, Ireland and now Portugal will reduce the debt burden of those countries – the very opposite will happen, as was seen from Zambia in the 1980s to Argentina at the beginning of the last decade. Similar policies to those being inflicted on Europe saw Zambia’s debt-to-GDP ratio double in the 1980s as the economy shrank. Argentina defaulted on its massive debts in 2001, after a 3-year recession brought about by IMF policies. Like Ireland today Argentina was told it had partied too hard, even though the debt had been run up by a disastrous set of privatisations and a currency peg foisted on the country by the same IMF. Its economy started recovering within a month of the default.
So why are these policies still being pursued? Almost every commentator has known from day one that the ‘bailout’ packages would not make the debts of Greece or Ireland sustainable. But delegates at last weekend’s conference were clear – that isn’t the point. The point is to recover as much of investors’ money as possible, however liable those investors were for the crisis, and transfer liability to society.
Even if Greece and Ireland need additional bailout money or restructuring through some sort of bonds – the same measures imposed on Latin America in the 1980s which created mountains of debt so big that those countries are still suffering the fall-out – the private investors will have been paid out. The argument becomes one between German and Greek populations as to who will foot the biggest portion of the bill, creating a dangerous nationalism already very evident.
European Commissioner for Economic Affairs Olli Rehn has continually told governments that these matters are best kept in the dark – public discussion is strongly discouraged. Those actually paying the price of austerity disagree, and campaigners in Greece and Ireland say the first step in any kind of just solution must be a debt audit – modelled on those carried out in developing countries like Ecuador.
A debt audit would provide people of Europe with the knowledge on which to base truly democratic decisions. As Sofia Sakorafa, the Greek MP who refused to sign the bailout terms and walked out of the governing party PASOK, put it at the conference ‘the answer to tyranny, oppression, violence and abuse is knowledge’. Andy Storey from Irish group Afri echoed this, saying the purpose of an audit is to ‘remove the mask of the financial system which controls our economy’.
The results of an audit can be rapid and concrete. Maria Lucia Fattorelli from Brazil is a veteran of debt audits, and helped Ecuadorian groups conduct an audit endorsed by President Correa in 2008. The Economist called Correa ‘incorruptible’ when public spending rose, after his successful default on bonds following the audit. Taking action now could mean saving European countries from the three decades of stunted development experienced by Latin American countries.
But the activists gathered this weekend believed that a debt audit can be the start of something even more fundamental, a new way of thinking about economics. As Sakorafa put it, an audit is the start of regaining values and vision to show ‘beyond speculating market games, there are more valuable concepts; there are people, there is history, there is culture, there is decency’.
Such a rejuvenation of political vision is vital if the crisis is not to cause impoverishment and spur inter-European hostility. On Sunday Irish economist Morgan Kelly said his country was heading for bankruptcy. A secret meeting of European leaders on Friday night came to the same conclusion about Greece, a country we are told is losing 1,000 jobs a day and where the suicide rate has doubled. Portugal’s €78 billion ‘bailout’ package, which is dependent on a freeze in civil service pay and pensions and reduced compensation to laid off workers, and cuts unemployment benefits at exactly the time unemployment figures are reaching record levels, will have a similar impact. Everywhere emigrants are streaming out of these countries in search of better prospects.
No amount of compensation will repair the damage these policies will wreak on society - as delegates across the developing world testified too. There is no reason for Europe to wait 30 years to learn this lesson. A European and international movement must make up for the poverty of our leader’s vision. Such a movement feels like it may have been born in Athens.
This article appeared in Red Pepper.
Organised by an unprecedented cross-section of Greek civil society, the international event launched the call for Greece (and now Ireland) to open their debts to the people of those countries for a public discussion as to how just and legitimate those debts really are.
Campaigners from Brazil, Peru, the Philippines, Morocco and Argentina told Greek activists to 'stand on their shoulders’ and not go through 30 years of devastating recession at the behest of international institutions like the International Monetary Fund.
The burgeoning European movement in opposition to debt repayments and austerity is making concrete links with groups from the global south, and it expresses a confidence and rationalism a million miles away from the governments of Greece and Ireland, which have followed policies which are punishing ordinary people in order to repay reckless bankers.
It is simply not possible that the policies being inflicted on Greece, Ireland and now Portugal will reduce the debt burden of those countries – the very opposite will happen, as was seen from Zambia in the 1980s to Argentina at the beginning of the last decade. Similar policies to those being inflicted on Europe saw Zambia’s debt-to-GDP ratio double in the 1980s as the economy shrank. Argentina defaulted on its massive debts in 2001, after a 3-year recession brought about by IMF policies. Like Ireland today Argentina was told it had partied too hard, even though the debt had been run up by a disastrous set of privatisations and a currency peg foisted on the country by the same IMF. Its economy started recovering within a month of the default.
So why are these policies still being pursued? Almost every commentator has known from day one that the ‘bailout’ packages would not make the debts of Greece or Ireland sustainable. But delegates at last weekend’s conference were clear – that isn’t the point. The point is to recover as much of investors’ money as possible, however liable those investors were for the crisis, and transfer liability to society.
Even if Greece and Ireland need additional bailout money or restructuring through some sort of bonds – the same measures imposed on Latin America in the 1980s which created mountains of debt so big that those countries are still suffering the fall-out – the private investors will have been paid out. The argument becomes one between German and Greek populations as to who will foot the biggest portion of the bill, creating a dangerous nationalism already very evident.
European Commissioner for Economic Affairs Olli Rehn has continually told governments that these matters are best kept in the dark – public discussion is strongly discouraged. Those actually paying the price of austerity disagree, and campaigners in Greece and Ireland say the first step in any kind of just solution must be a debt audit – modelled on those carried out in developing countries like Ecuador.
A debt audit would provide people of Europe with the knowledge on which to base truly democratic decisions. As Sofia Sakorafa, the Greek MP who refused to sign the bailout terms and walked out of the governing party PASOK, put it at the conference ‘the answer to tyranny, oppression, violence and abuse is knowledge’. Andy Storey from Irish group Afri echoed this, saying the purpose of an audit is to ‘remove the mask of the financial system which controls our economy’.
The results of an audit can be rapid and concrete. Maria Lucia Fattorelli from Brazil is a veteran of debt audits, and helped Ecuadorian groups conduct an audit endorsed by President Correa in 2008. The Economist called Correa ‘incorruptible’ when public spending rose, after his successful default on bonds following the audit. Taking action now could mean saving European countries from the three decades of stunted development experienced by Latin American countries.
But the activists gathered this weekend believed that a debt audit can be the start of something even more fundamental, a new way of thinking about economics. As Sakorafa put it, an audit is the start of regaining values and vision to show ‘beyond speculating market games, there are more valuable concepts; there are people, there is history, there is culture, there is decency’.
Such a rejuvenation of political vision is vital if the crisis is not to cause impoverishment and spur inter-European hostility. On Sunday Irish economist Morgan Kelly said his country was heading for bankruptcy. A secret meeting of European leaders on Friday night came to the same conclusion about Greece, a country we are told is losing 1,000 jobs a day and where the suicide rate has doubled. Portugal’s €78 billion ‘bailout’ package, which is dependent on a freeze in civil service pay and pensions and reduced compensation to laid off workers, and cuts unemployment benefits at exactly the time unemployment figures are reaching record levels, will have a similar impact. Everywhere emigrants are streaming out of these countries in search of better prospects.
No amount of compensation will repair the damage these policies will wreak on society - as delegates across the developing world testified too. There is no reason for Europe to wait 30 years to learn this lesson. A European and international movement must make up for the poverty of our leader’s vision. Such a movement feels like it may have been born in Athens.
This article appeared in Red Pepper.
Free trade is not what Africa needs, Mr Cameron
African prosperity relies on a wholesale rejection of the western free trade model, which is unlikely to be the view of David Cameron or the delegates he's travelling with in Africa
On his trip to South Africa yesterday, David Cameron talked of the need to go beyond debt cancellation and aid "to make African free trade the common purpose of the continent". He lamented there has never once been "a march or a concert to call for … an African free trade area". He pointed to the need for more inter-African trade to facilitate the growth that would mean "businesses growing, new jobs on offer, families on the up, living standards transformed".
Cameron's vision is far from "fresh", and is certainly not a radical extension of the anti-poverty agenda that led to a movement of millions of people calling for debt justice and the meeting of long overdue aid commitments. He repeats an orthodoxy that says the interests of the corporate delegates accompanying Cameron are the same as the interests of ordinary people across the African continent. Nearly three years into a global crisis caused by unbridled financial freedom, this orthodoxy should be consigned to the dustbin of history.
In 2003, Cameron would have been one of the MPs lobbied by 10,000 trade justice campaigners, while in 2005 he can hardly fail to remember the 250,000 people gathered in Edinburgh making the same demand. The debt and trade justice movements have never been simply arguments for more aid, but for a radical restructuring of the global economy and financial sector. They are all about enabling Africa to use its own resources for its own benefit – to genuinely enable countries to outgrow aid dependence.
The problem is that this agenda doesn't fit with Cameron's "free trade" ideology, or the interests of his delegation, which includes companies such as Barclays, G4S, Vodafone, Diageo and PricewaterhouseCoopers. So the premise of Cameron's article is to make it appear that there is only one possible way forward – free trade – and all right-thinking people who care about poverty and inequality must support this agenda.
But trade on the wrong terms has been of no benefit to Africa – rather it has ripped open markets, destroyed infant industries, undermined control of food production, and exploited resources. It is the opposite of what Africa needs.
Multinational companies operating in Africa are nothing new. According to Global Financial Integrity, between 1970 and 2008, Africa lost $850bn to $1.8tn in "illicit financial outflows", most importantly forgone tax paid by corporations. Such a loss of capital led to the need for countries to borrow, in turn leading to a debt crisis during which capital poured out of the continent and into the coffers of rich countries.
Today, the debt of sub-Saharan Africa still stands at nearly $200bn. Aid now accounts for $47bn, though debt repayments still cost $18bn every year, while much of the aid itself comes in the form of new loans or is simply handed to western corporations working in the country concerned.
Cameron says economic growth "will lift tens of millions out of poverty in the long run" but, again, it depends what sort of growth. Growth in recent years, in an environment where corporations are increasingly free to go where they like when they like, has become ever less effective at fighting poverty, and has made the world much less equal. The New Economics Foundation has shown that in the 1990s, for every $100 worth of growth in the world's income per person, just $0.60 contributed to reducing poverty for those living on less than a dollar a day.
Cameron is right that the idea of more inter-African trade is vitally important. But for years, inter-African trade has been discouraged by rich countries and a global trading system that uses Africa as a source of primary commodities for growth elsewhere. For example, European Union attempts to foist Economic Partnership Agreements on African countries give preferential access to European companies, thereby thwarting African attempts at integration. There are clear reasons why "for much of the continent it is easier to trade with Europe or America than it is to trade with a neighbour", and it has little to do with "red tape".
Africa has much to learn from South Korea, the model Cameron rather surprisingly raises. South Korea used a range of government interventions that are heretical in the free trade religion.
African prosperity relies on a wholesale rejection of the western "free trade" model. It means protecting industries, developing alternative and complementary means of trading, control of food production and banking, progressive tax structures, controlled use of savings, and strong regulation to ensure trade and investment really benefits people. This is unlikely to be the view of most of Cameron's corporate partners – if it was we would never have needed to march for justice in the first place.
This article appeared on the Guardian.
On his trip to South Africa yesterday, David Cameron talked of the need to go beyond debt cancellation and aid "to make African free trade the common purpose of the continent". He lamented there has never once been "a march or a concert to call for … an African free trade area". He pointed to the need for more inter-African trade to facilitate the growth that would mean "businesses growing, new jobs on offer, families on the up, living standards transformed".
Cameron's vision is far from "fresh", and is certainly not a radical extension of the anti-poverty agenda that led to a movement of millions of people calling for debt justice and the meeting of long overdue aid commitments. He repeats an orthodoxy that says the interests of the corporate delegates accompanying Cameron are the same as the interests of ordinary people across the African continent. Nearly three years into a global crisis caused by unbridled financial freedom, this orthodoxy should be consigned to the dustbin of history.
In 2003, Cameron would have been one of the MPs lobbied by 10,000 trade justice campaigners, while in 2005 he can hardly fail to remember the 250,000 people gathered in Edinburgh making the same demand. The debt and trade justice movements have never been simply arguments for more aid, but for a radical restructuring of the global economy and financial sector. They are all about enabling Africa to use its own resources for its own benefit – to genuinely enable countries to outgrow aid dependence.
The problem is that this agenda doesn't fit with Cameron's "free trade" ideology, or the interests of his delegation, which includes companies such as Barclays, G4S, Vodafone, Diageo and PricewaterhouseCoopers. So the premise of Cameron's article is to make it appear that there is only one possible way forward – free trade – and all right-thinking people who care about poverty and inequality must support this agenda.
But trade on the wrong terms has been of no benefit to Africa – rather it has ripped open markets, destroyed infant industries, undermined control of food production, and exploited resources. It is the opposite of what Africa needs.
Multinational companies operating in Africa are nothing new. According to Global Financial Integrity, between 1970 and 2008, Africa lost $850bn to $1.8tn in "illicit financial outflows", most importantly forgone tax paid by corporations. Such a loss of capital led to the need for countries to borrow, in turn leading to a debt crisis during which capital poured out of the continent and into the coffers of rich countries.
Today, the debt of sub-Saharan Africa still stands at nearly $200bn. Aid now accounts for $47bn, though debt repayments still cost $18bn every year, while much of the aid itself comes in the form of new loans or is simply handed to western corporations working in the country concerned.
Cameron says economic growth "will lift tens of millions out of poverty in the long run" but, again, it depends what sort of growth. Growth in recent years, in an environment where corporations are increasingly free to go where they like when they like, has become ever less effective at fighting poverty, and has made the world much less equal. The New Economics Foundation has shown that in the 1990s, for every $100 worth of growth in the world's income per person, just $0.60 contributed to reducing poverty for those living on less than a dollar a day.
Cameron is right that the idea of more inter-African trade is vitally important. But for years, inter-African trade has been discouraged by rich countries and a global trading system that uses Africa as a source of primary commodities for growth elsewhere. For example, European Union attempts to foist Economic Partnership Agreements on African countries give preferential access to European companies, thereby thwarting African attempts at integration. There are clear reasons why "for much of the continent it is easier to trade with Europe or America than it is to trade with a neighbour", and it has little to do with "red tape".
Africa has much to learn from South Korea, the model Cameron rather surprisingly raises. South Korea used a range of government interventions that are heretical in the free trade religion.
African prosperity relies on a wholesale rejection of the western "free trade" model. It means protecting industries, developing alternative and complementary means of trading, control of food production and banking, progressive tax structures, controlled use of savings, and strong regulation to ensure trade and investment really benefits people. This is unlikely to be the view of most of Cameron's corporate partners – if it was we would never have needed to march for justice in the first place.
This article appeared on the Guardian.
Thursday, 14 April 2011
Iceland’s message to Portugal
This week has witnessed two very different reactions to European debt. At one end of Europe, Iceland’s voters decided once again not to accept the payment terms of their ‘creditors’, the British and Dutch governments, following the collapse of Icelandic banks in 2008. At the other, Portugal is being pushed down the path of shock therapy by the European Union, with the people of that country cut out of a process which will change their lives dramatically.
Neither Iceland not Portugal will have it easy in the years ahead. But there is a world of difference between the refusal of the people of Iceland ‘to pay for failed banks’ in the words of their President, and the pain being imposed on Portugal from the outside. The European Central Bank’s head Jean-Claude Trichet has made it perfectly clear that the negotiations on Portugal’s future are ‘certainly not for public’ debate.
Iceland’s people have not made a knee-jerk reaction. They are well aware that refusal to pay is the less easy short-term route to take. An impending court case by the UK and the Netherlands, the negative reaction of credit markets and the threatened block to their EU membership will all take a toll.
But for the people of Iceland the orthodoxy as to how countries are supposed to deal with debt is not simply economically flawed, it is deeply unjust, unfairly distributing power and wealth within and between societies. 28-year-old voter Thorgerdun Ásgeirsdóttir said: ‘I know this will probably hurt us internationally, but it is worth taking a stance.’
If the people of a country which truly bought into free market ideology, deregulated capital markets and cheap lending can refuse to pay for the crimes of the banks, then those that did less well from the decades of financial boom can be expected to feel even more impassioned.
In Greece such anger is starting to turn into a constructive challenge to the power of finance. A debt audit commission has been called for by hundreds of academics, politicians and activists. Such a commission would throw open Greece’s debts for public examination – directly confronting the way that the IMF and European Union work behind closed doors to force their often disastrous medicine on member countries.
As Greek activists have said, ‘the people who are called upon to bear the costs of EU programmes have a democratic right to receive full information on public debt. An Audit Commission can begin to redress this deficiency.’
Their resolve is currently being bolstered by a website phenomena – a short viral film called debtocracy (government by debt) – sweeping Greece’s online population and convincing them they have been taken for a ride. Early next month activists from across Europe and the developing world will gather in Athens to put together a programme which will challenge the IMF’s policies in Greece.
Portugal’s deal is just beginning to be hammered out. As in Greece and Ireland, a ‘bail-out’ package will primarily benefit Western European banks, with €216 billion of outstanding loans to Portugal, while ordinary people endure a programme of deep spending cuts, reduced workers’ rights and widespread privatisation. The head of Portugal’s Banco Carregosa told the FT: ‘It’s not an exaggeration to call it shock therapy.’
The comparisons with developing world countries are obvious and the mistakes there are already being repeated. Time and again banks were bailed out and the poorest people in the world were pushed even deeper into poverty. Today countries from Sierra Leone to Jamaica are racking up ever more debts, once again, to weather the banker’s storm.
This is why a line must be drawn in Europe. Pouring more debt on top of Portugal’s woes will do nothing to resuscitate the economy. Portugal’s debt is totally unsustainable – largely the result of reckless private lending over the last decade. Those responsible are being bailed out, those that aren’t are suffering the pain. This is what Iceland has refused to do.
The people of Iceland have stood up for their sovereignty. Their future looks considerably brighter than those of Ireland or Portugal. The people of Greece are just beginning their struggle. The outcomes will have a monumental impact on the fight against poverty and inequality across the world.
Neither Iceland not Portugal will have it easy in the years ahead. But there is a world of difference between the refusal of the people of Iceland ‘to pay for failed banks’ in the words of their President, and the pain being imposed on Portugal from the outside. The European Central Bank’s head Jean-Claude Trichet has made it perfectly clear that the negotiations on Portugal’s future are ‘certainly not for public’ debate.
Iceland’s people have not made a knee-jerk reaction. They are well aware that refusal to pay is the less easy short-term route to take. An impending court case by the UK and the Netherlands, the negative reaction of credit markets and the threatened block to their EU membership will all take a toll.
But for the people of Iceland the orthodoxy as to how countries are supposed to deal with debt is not simply economically flawed, it is deeply unjust, unfairly distributing power and wealth within and between societies. 28-year-old voter Thorgerdun Ásgeirsdóttir said: ‘I know this will probably hurt us internationally, but it is worth taking a stance.’
If the people of a country which truly bought into free market ideology, deregulated capital markets and cheap lending can refuse to pay for the crimes of the banks, then those that did less well from the decades of financial boom can be expected to feel even more impassioned.
In Greece such anger is starting to turn into a constructive challenge to the power of finance. A debt audit commission has been called for by hundreds of academics, politicians and activists. Such a commission would throw open Greece’s debts for public examination – directly confronting the way that the IMF and European Union work behind closed doors to force their often disastrous medicine on member countries.
As Greek activists have said, ‘the people who are called upon to bear the costs of EU programmes have a democratic right to receive full information on public debt. An Audit Commission can begin to redress this deficiency.’
Their resolve is currently being bolstered by a website phenomena – a short viral film called debtocracy (government by debt) – sweeping Greece’s online population and convincing them they have been taken for a ride. Early next month activists from across Europe and the developing world will gather in Athens to put together a programme which will challenge the IMF’s policies in Greece.
Portugal’s deal is just beginning to be hammered out. As in Greece and Ireland, a ‘bail-out’ package will primarily benefit Western European banks, with €216 billion of outstanding loans to Portugal, while ordinary people endure a programme of deep spending cuts, reduced workers’ rights and widespread privatisation. The head of Portugal’s Banco Carregosa told the FT: ‘It’s not an exaggeration to call it shock therapy.’
The comparisons with developing world countries are obvious and the mistakes there are already being repeated. Time and again banks were bailed out and the poorest people in the world were pushed even deeper into poverty. Today countries from Sierra Leone to Jamaica are racking up ever more debts, once again, to weather the banker’s storm.
This is why a line must be drawn in Europe. Pouring more debt on top of Portugal’s woes will do nothing to resuscitate the economy. Portugal’s debt is totally unsustainable – largely the result of reckless private lending over the last decade. Those responsible are being bailed out, those that aren’t are suffering the pain. This is what Iceland has refused to do.
The people of Iceland have stood up for their sovereignty. Their future looks considerably brighter than those of Ireland or Portugal. The people of Greece are just beginning their struggle. The outcomes will have a monumental impact on the fight against poverty and inequality across the world.
The revolution will not be organised
Nick Dearden writes from the World Social Forum in Dakar, Senegal.
There is one word that I've heard to sum up this year's Word Social Forum again and again: chaos. Just days before the WSF started the University which is hosting the event got a new director, who decided that classes would not be postponed for the Forum, leaving it over 400 rooms down.
The daily programmes were therefore pretty meaningless, even when they did eventually go online a couple of hours after the first session had started, because no-one knew which of the hastily constructed tents the session they were looking for might be in. Participants were rather like a very multicultural group of squatters on the dusty, windswept wasteland of Dakar University grounds.
All too often this meant that participants stuck together with their own group of friends or colleagues, unable to branch out into anything else for fear of another wasted two hours. For the truly new activists, unconnected to an organisation, the experience was intensely frustrating.
Not that the event wasn't enjoyable, as activists were forced to use their self-organising skills simply to make sure their sessions happened at all. Palestinian activists had commissioned their own tent to be built right outside the main library which became a very visible hub for their activities, attracting large groups of students from the University to come and learn the basics of a struggle they knew little about. The forum had something of a festival feel from the fantastic food tents to the street sellers to the grotty toilets.
The location was also appropriate. My hotel window overlooked Goree Island, the point of departure for tens of thousands of Africans shipped into slavery in the New World. This slavery was the basis for the industrial revolution and the economic rise of the global North, as well as being at the heart of the serious under-development which is still so sharply felt across Africa today.
Despite this, and while the fault for the chaos of the forum can clearly not all be laid at the feet of the organisers, the experience has forced a more urgent questioning as to whether the WSF is still worthwhile. Set up as an expression of the rapidly burgeoning 'anti-globalisation' movement in 2001, the WSF faces a very different world, and caters to a different movement.
It seems there will be changes to the Forum next year. Some on the unwieldy International Council which organises the Forum are arguing for it to be less frequent, others that the WSF should cease to exist altogether and more focus be given to the regional and issue-based social forums.
But we need to be careful not to throw out what is truly amazing about the WSF. Struggles against tyranny in Egypt and Tunisia have formed a backdrop to this Forum, showing us what is possible, the vital role of solidarity that the WSF can play a role in creating. The thousands of people marching in Dakar as the Forum opened reminds us that the purpose of holding such an event here is the injection of energy it can give to struggles in the regions in which the WSF is held. One activist told us that the point is not how many meetings we go to, but the effect of the preparation of the WSF on the size and unity of the movement in its host country. It didn't ease our frustration at the time, but is clearly an important consideration.
I leave the WSF convinced of why I work on debt. Seeing 2,000 activists dancing to a famous Senegalese hip-hop band singing about debt in an assembly festooned with the banners of the Committee for the Abolition of Third World Debt, is a pretty powerful reminder of just how central this struggle remains in Africa, even if it doesn't always feel that important in London.
None of this can be compromised, even if reform is necessary. The World Social Forum is an intensely frustrating, unwieldy and chaotic process. But perhaps that's the nature of our movement.
You can find the full blog at the JDC website.
There is one word that I've heard to sum up this year's Word Social Forum again and again: chaos. Just days before the WSF started the University which is hosting the event got a new director, who decided that classes would not be postponed for the Forum, leaving it over 400 rooms down.
The daily programmes were therefore pretty meaningless, even when they did eventually go online a couple of hours after the first session had started, because no-one knew which of the hastily constructed tents the session they were looking for might be in. Participants were rather like a very multicultural group of squatters on the dusty, windswept wasteland of Dakar University grounds.
All too often this meant that participants stuck together with their own group of friends or colleagues, unable to branch out into anything else for fear of another wasted two hours. For the truly new activists, unconnected to an organisation, the experience was intensely frustrating.
Not that the event wasn't enjoyable, as activists were forced to use their self-organising skills simply to make sure their sessions happened at all. Palestinian activists had commissioned their own tent to be built right outside the main library which became a very visible hub for their activities, attracting large groups of students from the University to come and learn the basics of a struggle they knew little about. The forum had something of a festival feel from the fantastic food tents to the street sellers to the grotty toilets.
The location was also appropriate. My hotel window overlooked Goree Island, the point of departure for tens of thousands of Africans shipped into slavery in the New World. This slavery was the basis for the industrial revolution and the economic rise of the global North, as well as being at the heart of the serious under-development which is still so sharply felt across Africa today.
Despite this, and while the fault for the chaos of the forum can clearly not all be laid at the feet of the organisers, the experience has forced a more urgent questioning as to whether the WSF is still worthwhile. Set up as an expression of the rapidly burgeoning 'anti-globalisation' movement in 2001, the WSF faces a very different world, and caters to a different movement.
It seems there will be changes to the Forum next year. Some on the unwieldy International Council which organises the Forum are arguing for it to be less frequent, others that the WSF should cease to exist altogether and more focus be given to the regional and issue-based social forums.
But we need to be careful not to throw out what is truly amazing about the WSF. Struggles against tyranny in Egypt and Tunisia have formed a backdrop to this Forum, showing us what is possible, the vital role of solidarity that the WSF can play a role in creating. The thousands of people marching in Dakar as the Forum opened reminds us that the purpose of holding such an event here is the injection of energy it can give to struggles in the regions in which the WSF is held. One activist told us that the point is not how many meetings we go to, but the effect of the preparation of the WSF on the size and unity of the movement in its host country. It didn't ease our frustration at the time, but is clearly an important consideration.
I leave the WSF convinced of why I work on debt. Seeing 2,000 activists dancing to a famous Senegalese hip-hop band singing about debt in an assembly festooned with the banners of the Committee for the Abolition of Third World Debt, is a pretty powerful reminder of just how central this struggle remains in Africa, even if it doesn't always feel that important in London.
None of this can be compromised, even if reform is necessary. The World Social Forum is an intensely frustrating, unwieldy and chaotic process. But perhaps that's the nature of our movement.
You can find the full blog at the JDC website.
Born into debt?
For south Sudan, sovereignty must mean more than having your own border
The nearly unanimous south Sudanese referendum result announced over the weekend is likely to lead to independence for a southern state by July. But it only marks one step along the road to true sovereignty for this oppressed and impoverished people. As south Sudan's oil wealth has been used to enrich elites in the North for decades, so it is now being viewed with hungry eyes by the US and its allies.
The debt which is inherited by this new state is likely to play a key role in attempts to assert control on south Sudan from the outside. The Sudanese government in Khartoum currently has a debt of $35 billion, large parts of which stretch back to the 1970s and 1980s when the regime of General Nimeiry was propped up by the US. Of this debt, $20 billion represents interest, following years of default by the Bashir regime.
The UK claims Sudan owes £650 million ($1 billion) to the government's Export Credit Guarantees Department – the department which insures some British exports, usually arms, aerospace and big fossil fuel projects. The department refuses to say what projects the debt is based on. What we do know is that since 1984 an interest rate of between 10 and 12 per cent has been charged on this debt, wildly inflating it – in fact new figures reveal that up-to 90 per cent of Sudanese debt owed to the UK is interest.
Justice demands that south Sudan is not handed a portion of Khartoum’s debt, but the International Monetary Fund probably has other ideas. One suggestion is that Sudan will be allocated debt on its inception that will then be cancelled. No-one should fall into the trap of believing this to be just – in reality it would mean the southern state would be forced to go through a lengthy cancellation process, during which it would probably have to take out new loans to pay interest on its unjust debts, as well as whatever reforms the IMF felt like pushing on the country. It would ensure south Sudan could not escape from the grips of international institutions and their neoliberal ideology.
Meanwhile, popular protests have spread to Khartoum in north Sudan. Here too, most of the accumulated debts undoubtedly arose more through international power play than genuine attempts to improve the lives of Sudan’s people. The people of Sudan might want to take a look at the calls of people as far apart as Greece and Bolivia, and call for an audit of Sudan’s debts so they can find out just what the debts paid for and how legitimate they are.
Sovereignty for south Sudan means much more than a declaration of independence from the north. It means the people of that country controlling their own economic development. But with a large debt hanging over their heads, and reserves of oil ready to plunder, the people of south Sudan will need to be prepared to continue to struggle for real freedom.
The nearly unanimous south Sudanese referendum result announced over the weekend is likely to lead to independence for a southern state by July. But it only marks one step along the road to true sovereignty for this oppressed and impoverished people. As south Sudan's oil wealth has been used to enrich elites in the North for decades, so it is now being viewed with hungry eyes by the US and its allies.
The debt which is inherited by this new state is likely to play a key role in attempts to assert control on south Sudan from the outside. The Sudanese government in Khartoum currently has a debt of $35 billion, large parts of which stretch back to the 1970s and 1980s when the regime of General Nimeiry was propped up by the US. Of this debt, $20 billion represents interest, following years of default by the Bashir regime.
The UK claims Sudan owes £650 million ($1 billion) to the government's Export Credit Guarantees Department – the department which insures some British exports, usually arms, aerospace and big fossil fuel projects. The department refuses to say what projects the debt is based on. What we do know is that since 1984 an interest rate of between 10 and 12 per cent has been charged on this debt, wildly inflating it – in fact new figures reveal that up-to 90 per cent of Sudanese debt owed to the UK is interest.
Justice demands that south Sudan is not handed a portion of Khartoum’s debt, but the International Monetary Fund probably has other ideas. One suggestion is that Sudan will be allocated debt on its inception that will then be cancelled. No-one should fall into the trap of believing this to be just – in reality it would mean the southern state would be forced to go through a lengthy cancellation process, during which it would probably have to take out new loans to pay interest on its unjust debts, as well as whatever reforms the IMF felt like pushing on the country. It would ensure south Sudan could not escape from the grips of international institutions and their neoliberal ideology.
Meanwhile, popular protests have spread to Khartoum in north Sudan. Here too, most of the accumulated debts undoubtedly arose more through international power play than genuine attempts to improve the lives of Sudan’s people. The people of Sudan might want to take a look at the calls of people as far apart as Greece and Bolivia, and call for an audit of Sudan’s debts so they can find out just what the debts paid for and how legitimate they are.
Sovereignty for south Sudan means much more than a declaration of independence from the north. It means the people of that country controlling their own economic development. But with a large debt hanging over their heads, and reserves of oil ready to plunder, the people of south Sudan will need to be prepared to continue to struggle for real freedom.
Optimism of the will
Noam Chomsky's Hopes and Prospects (Hamish Hamilton), reviewed by Nick Dearden
The great genius of Noam Chomsky is his way of presenting supposedly radical politics as so reasonable as to be obvious, showing with great clarity how the 'mainstream' political establishment is truly extremist.
Hopes and Prospects lacks the painstaking detail of earlier works, based as it is on a series of lectures. To readers of Red Pepper, the book's topics will also be nothing new - from Latin America to Palestine, the election of Obama to the 10th anniversary of the fall of Soviet communism.
But even if the information is not completely new, the clarity with which Chomsky exposes the hypocrisy, illogic and lack of democracy inherent in the current political and economic system makes you feel like you're hearing the arguments for the first time.
Famously, Chomsky calls the current economic system 'socialism for the rich', and in this book he elaborates how this form of 'state capitalism' has created the wealth that our development is based on. 'In the phrase "North American free trade agreement" the only accurate words are "North American",' says Chomsky, characterising the current trading system as constituting a series of top-down charters for investor rights.
In fact, US power has been constructed on heavy state intervention in, and protection of, the economy. Cotton production, a key element of the industrial revolution, more or less occupying the role of oil today, was facilitated through slavery and the elimination of native Americans - 'rather extreme forms of market interference'. Even sectors of the economy regarded as textbook examples of entrepreneurialism today, like IT and communications, developed through massive military spending and state development. Paid for by taxpayers, the rewards are handed to the richest.
Chomsky considers the crucial role of the media in 'manufacturing consent' in modern capitalism by looking at Israel and Palestine. The consistent failure of western media to report fairly on the occupation is highlighted by its emphasis on the kidnap of Corporal Shalit in justifying Israeli aggression, while totally ignoring the capture of two Gazan civilians by Israeli forces just one day before. In reporting on Iran, the media ignores repeated attempts by Arab states, Iran and most countries in the world, excepting successive US administrations, to seek a Middle East free from all weapons of mass destruction.
In fact, increasing global militarisation is consistently supported by the US, with allies like Britain, in the teeth of opposition from most countries and people. Through their military strategy, their contribution towards climate change and their support of increasingly dangerous forms of capitalism, it is indeed these western countries that threaten the extinction of civilisation.
Chomsky will disillusion anyone who places hopes in the election of Obama. Obama's first appointments included Rahm Emanuel, pro-war and pro-Wall Street; Robert Rubin and Lawrence Summers, major de-regulators of the financial sector; James Jones, fierce advocate of the expansion of Nato; and Dennis Blair, formerly a strong supporter of US ties with the barbaric President Suharto of Indonesia.
Obama's view of the world is nothing new, excepting some rhetoric: the policy of arming and training Palestinian security forces on the West Bank to maintain tight control of society; the vilification of Iran; the support of friendly thugs such as Hosni Mubarak in Egypt; the use of terror centres (just not in Guantanamo); and support (albeit indirect) of the violent coup in Honduras.
This should come as no surprise, according to Chomsky, as Obama's campaign was above all a public relations triumph (and named so by that industry - he beat Apple as 'marketer of the year' in Advertising Age): 'Obama's message of "hope" and "change" offered a virtual blank slate on which supporters could write their wishes.' Chomsky contrasts Obama's election with the 2005 election in Bolivia, where the campaign 'was focused on crucial issues, very well known to voters: control of resources, cultural rights, questions of justice'.
Such a critique might be expected to depress, but the anger Chomsky's writing provokes is complemented by an incredible hope. In particular, Chomsky never blames ordinary people, highlighting opinion poll after poll pointing out the deep desire for a more peaceful, equal and generous world.
Ultimately, however, this might be Chomsky's biggest flaw. It is difficult to square the existence of an all-seeing, all-controlling, death-driven capitalist system with a real opening for the kind of radical change that is so necessary. The system makes no mistakes in Chomsky's analysis - from Vietnam to Iraq, ultimately the Empire gets what it wants.
In societies where people's emotions and drives are so expertly manipulated, it takes a real leap of faith to see these same people as agents of change - almost a belief that some innate goodness will overpower the social conditioning that keeps us passive and ineffective.
Indeed, Chomsky seems to have the same concerns, as when he invokes biologist Ernst Mayr, who speculated that higher intelligence might be an evolutionary error, incapable of survival. Perhaps ultimately he is expressing no more than the necessary optimism of the will that governs most activists' work. With these concerns in front of us, Chomsky nonetheless remains the sharpest, clearest and most inspirational thinker the movement has. Hopes and Prospects will keep you going through a good few dark hours.
This review first appeared in Red Pepper.
The great genius of Noam Chomsky is his way of presenting supposedly radical politics as so reasonable as to be obvious, showing with great clarity how the 'mainstream' political establishment is truly extremist.
Hopes and Prospects lacks the painstaking detail of earlier works, based as it is on a series of lectures. To readers of Red Pepper, the book's topics will also be nothing new - from Latin America to Palestine, the election of Obama to the 10th anniversary of the fall of Soviet communism.
But even if the information is not completely new, the clarity with which Chomsky exposes the hypocrisy, illogic and lack of democracy inherent in the current political and economic system makes you feel like you're hearing the arguments for the first time.
Famously, Chomsky calls the current economic system 'socialism for the rich', and in this book he elaborates how this form of 'state capitalism' has created the wealth that our development is based on. 'In the phrase "North American free trade agreement" the only accurate words are "North American",' says Chomsky, characterising the current trading system as constituting a series of top-down charters for investor rights.
In fact, US power has been constructed on heavy state intervention in, and protection of, the economy. Cotton production, a key element of the industrial revolution, more or less occupying the role of oil today, was facilitated through slavery and the elimination of native Americans - 'rather extreme forms of market interference'. Even sectors of the economy regarded as textbook examples of entrepreneurialism today, like IT and communications, developed through massive military spending and state development. Paid for by taxpayers, the rewards are handed to the richest.
Chomsky considers the crucial role of the media in 'manufacturing consent' in modern capitalism by looking at Israel and Palestine. The consistent failure of western media to report fairly on the occupation is highlighted by its emphasis on the kidnap of Corporal Shalit in justifying Israeli aggression, while totally ignoring the capture of two Gazan civilians by Israeli forces just one day before. In reporting on Iran, the media ignores repeated attempts by Arab states, Iran and most countries in the world, excepting successive US administrations, to seek a Middle East free from all weapons of mass destruction.
In fact, increasing global militarisation is consistently supported by the US, with allies like Britain, in the teeth of opposition from most countries and people. Through their military strategy, their contribution towards climate change and their support of increasingly dangerous forms of capitalism, it is indeed these western countries that threaten the extinction of civilisation.
Chomsky will disillusion anyone who places hopes in the election of Obama. Obama's first appointments included Rahm Emanuel, pro-war and pro-Wall Street; Robert Rubin and Lawrence Summers, major de-regulators of the financial sector; James Jones, fierce advocate of the expansion of Nato; and Dennis Blair, formerly a strong supporter of US ties with the barbaric President Suharto of Indonesia.
Obama's view of the world is nothing new, excepting some rhetoric: the policy of arming and training Palestinian security forces on the West Bank to maintain tight control of society; the vilification of Iran; the support of friendly thugs such as Hosni Mubarak in Egypt; the use of terror centres (just not in Guantanamo); and support (albeit indirect) of the violent coup in Honduras.
This should come as no surprise, according to Chomsky, as Obama's campaign was above all a public relations triumph (and named so by that industry - he beat Apple as 'marketer of the year' in Advertising Age): 'Obama's message of "hope" and "change" offered a virtual blank slate on which supporters could write their wishes.' Chomsky contrasts Obama's election with the 2005 election in Bolivia, where the campaign 'was focused on crucial issues, very well known to voters: control of resources, cultural rights, questions of justice'.
Such a critique might be expected to depress, but the anger Chomsky's writing provokes is complemented by an incredible hope. In particular, Chomsky never blames ordinary people, highlighting opinion poll after poll pointing out the deep desire for a more peaceful, equal and generous world.
Ultimately, however, this might be Chomsky's biggest flaw. It is difficult to square the existence of an all-seeing, all-controlling, death-driven capitalist system with a real opening for the kind of radical change that is so necessary. The system makes no mistakes in Chomsky's analysis - from Vietnam to Iraq, ultimately the Empire gets what it wants.
In societies where people's emotions and drives are so expertly manipulated, it takes a real leap of faith to see these same people as agents of change - almost a belief that some innate goodness will overpower the social conditioning that keeps us passive and ineffective.
Indeed, Chomsky seems to have the same concerns, as when he invokes biologist Ernst Mayr, who speculated that higher intelligence might be an evolutionary error, incapable of survival. Perhaps ultimately he is expressing no more than the necessary optimism of the will that governs most activists' work. With these concerns in front of us, Chomsky nonetheless remains the sharpest, clearest and most inspirational thinker the movement has. Hopes and Prospects will keep you going through a good few dark hours.
This review first appeared in Red Pepper.
Know Your Enemy: The Export Credit Guarantee Department
In December 2006, a little know Government department became part of a national scandal when Tony Blair called on the Serious Fraud Office to drop a corruption investigation into how a British arms company secured a massive Saudi Arabian arms deal during the 1980s. The controversial deal had been insured by the British government through the Export Credits Guarantee Department (ECGD).
The Al-Yamamah deal was the biggest arms deal in British history, and had been controversial even when first discussed by the Thatcher government the mid-1980s. By 2004, the Serious Fraud Office had began looking at alleged corruption in the deal – notably that the sales had been overpriced in order to pay off and entertain members of the Saudi Royal Family.
Only at the end of 2006, amidst negotiations for a further Saudi arms deal, did Blair ask the SFO to drop the inquiry, which it did. Opposition MP Vince Cable said at the time that the decision to drop the case: “has undermined the rule of law and Britain’s reputation” and made a mockery of Gordon Brown’s fondness for lecturing the developing world on corruption.
Today that same MP, Vince Cable, is effectively in charge of the ECGD, answerable as it is to the Department for Business, Skills and Innovation. To date, little has been announced by way of reform.
What is the ECGD?
The ECGD exists to support British exports by providing them with a sort of insurance. It normally supports big companies involved in big projects in the developing world. In fact, over the last 10 years, ECGD support for fossil fuels, arms sales and aerospace (aeroplanes) has accounted for around 75% of its work. Last year one single company, Airbus, received 89% of ECGD support.
From arms sales to dictators to oil and gas pipelines through to mega-dams, ECGD has backed projects which have been implicated in corruption, environmental destruction and human rights abuses.
Even worse, when deals go wrong, it is often the developing country that ends up in debt. The ECGD pays out insurance (backed by the British taxpayer) and the amount becomes a debt of the country where the project took place.
Today, developing countries owe £2 billion of debt to the ECGD and have repaid £2.9 billion since 2005.
Arms sales and controlling energy supplies
To really get to grips with the problem with the ECGD, you only need to look at some of their past projects. Indonesia currently ‘owes’ the ECGD over £500 million, most of which was run-up selling British weapons to the brutal General Suharto in the 1980s and ‘90s.
Suharto killed between 500,000 and 1 million activists during his first year in office and conducted a 24-year occupation of East Timor. From 1994, Suharto bought half of his military equipment from the UK, supported by the ECGD. Some of these weapons, including Hawk aircraft, Scorpion tanks and water cannons, were sighted in use against civilians, including during the attack on Aceh. Yet the current Indonesian government is still paying for these tools of repression.
As fossil fuels become more difficult to access, export credits are again used to protect ‘British interests’ throughout the world. That’s why ECGD supported the Baku-Tiblisi-Ceyhan pipeline – an oil pipeline connecting up the Azeri oil field in the Caspian Sea to the Mediterranean, passing through Azerbaijan, Georgia and Turkey. The pipeline started pumping up to a million barrels of oil a day in 2006.
The pipeline included a series of controversial agreements between oil companies and the countries involved, which gave those companies special legal status. In essence, the agreements took priority over all national laws except the constitution, and prevented any new laws, including improvements in environmental or human rights laws, from affecting the companies' profits. Amnesty International argued that these agreements “effectively create a ‘rights-free corridor’ for the pipeline”.
There’s more where they came from. Like a hydro-electric power station in Kenya which cost four times what it should have done and produced only a fraction of the power promised. The Kenyan press called the project “a stinking scandal” for which the Kenyan government are still repaying.
Then there’s a power station in Dabhol, India. In June 2001 the station was closed after the electricity board decided not to buy any more power from the plant because it cost four times more than other domestic power producers. The power plant now sits dormant and a country in which 450 million people are living in extreme poverty, faces a compensation bill for a project that has not served its needs.
Promoting a green and pleasant land?
In a recession, export credits are presented as a key way that the British government can support struggling industry and re-stimulate the British economy.
But what sort of economy is the ECGD currently promoting? Sure it could help struggling British exporters at the leading edge of useful innovation. It could help create jobs in renewable energy sectors. But there isn’t much chance of that when the ECGD does not even have a policy on climate change.
While campaigners have given ECGD a relatively easy ride in recent years, business lobbyists have been pushing back on the already poor standards that do exist. Early in 2010, the Labour Government watered ECGD standards down. One example of what this change will mean is that smaller investments will no longer be screened for any sort of social or environmental impact – even on issues as significant as child labour and forced labour.
This means supporting British interests at the expense of human rights abuses, environmental destruction and corruption in other parts of the world. If we want to avoid another generation of reckless projects and toxic debts, we need to change the ECGD now.
This article first appeared in Red Pepper.
The Al-Yamamah deal was the biggest arms deal in British history, and had been controversial even when first discussed by the Thatcher government the mid-1980s. By 2004, the Serious Fraud Office had began looking at alleged corruption in the deal – notably that the sales had been overpriced in order to pay off and entertain members of the Saudi Royal Family.
Only at the end of 2006, amidst negotiations for a further Saudi arms deal, did Blair ask the SFO to drop the inquiry, which it did. Opposition MP Vince Cable said at the time that the decision to drop the case: “has undermined the rule of law and Britain’s reputation” and made a mockery of Gordon Brown’s fondness for lecturing the developing world on corruption.
Today that same MP, Vince Cable, is effectively in charge of the ECGD, answerable as it is to the Department for Business, Skills and Innovation. To date, little has been announced by way of reform.
What is the ECGD?
The ECGD exists to support British exports by providing them with a sort of insurance. It normally supports big companies involved in big projects in the developing world. In fact, over the last 10 years, ECGD support for fossil fuels, arms sales and aerospace (aeroplanes) has accounted for around 75% of its work. Last year one single company, Airbus, received 89% of ECGD support.
From arms sales to dictators to oil and gas pipelines through to mega-dams, ECGD has backed projects which have been implicated in corruption, environmental destruction and human rights abuses.
Even worse, when deals go wrong, it is often the developing country that ends up in debt. The ECGD pays out insurance (backed by the British taxpayer) and the amount becomes a debt of the country where the project took place.
Today, developing countries owe £2 billion of debt to the ECGD and have repaid £2.9 billion since 2005.
Arms sales and controlling energy supplies
To really get to grips with the problem with the ECGD, you only need to look at some of their past projects. Indonesia currently ‘owes’ the ECGD over £500 million, most of which was run-up selling British weapons to the brutal General Suharto in the 1980s and ‘90s.
Suharto killed between 500,000 and 1 million activists during his first year in office and conducted a 24-year occupation of East Timor. From 1994, Suharto bought half of his military equipment from the UK, supported by the ECGD. Some of these weapons, including Hawk aircraft, Scorpion tanks and water cannons, were sighted in use against civilians, including during the attack on Aceh. Yet the current Indonesian government is still paying for these tools of repression.
As fossil fuels become more difficult to access, export credits are again used to protect ‘British interests’ throughout the world. That’s why ECGD supported the Baku-Tiblisi-Ceyhan pipeline – an oil pipeline connecting up the Azeri oil field in the Caspian Sea to the Mediterranean, passing through Azerbaijan, Georgia and Turkey. The pipeline started pumping up to a million barrels of oil a day in 2006.
The pipeline included a series of controversial agreements between oil companies and the countries involved, which gave those companies special legal status. In essence, the agreements took priority over all national laws except the constitution, and prevented any new laws, including improvements in environmental or human rights laws, from affecting the companies' profits. Amnesty International argued that these agreements “effectively create a ‘rights-free corridor’ for the pipeline”.
There’s more where they came from. Like a hydro-electric power station in Kenya which cost four times what it should have done and produced only a fraction of the power promised. The Kenyan press called the project “a stinking scandal” for which the Kenyan government are still repaying.
Then there’s a power station in Dabhol, India. In June 2001 the station was closed after the electricity board decided not to buy any more power from the plant because it cost four times more than other domestic power producers. The power plant now sits dormant and a country in which 450 million people are living in extreme poverty, faces a compensation bill for a project that has not served its needs.
Promoting a green and pleasant land?
In a recession, export credits are presented as a key way that the British government can support struggling industry and re-stimulate the British economy.
But what sort of economy is the ECGD currently promoting? Sure it could help struggling British exporters at the leading edge of useful innovation. It could help create jobs in renewable energy sectors. But there isn’t much chance of that when the ECGD does not even have a policy on climate change.
While campaigners have given ECGD a relatively easy ride in recent years, business lobbyists have been pushing back on the already poor standards that do exist. Early in 2010, the Labour Government watered ECGD standards down. One example of what this change will mean is that smaller investments will no longer be screened for any sort of social or environmental impact – even on issues as significant as child labour and forced labour.
This means supporting British interests at the expense of human rights abuses, environmental destruction and corruption in other parts of the world. If we want to avoid another generation of reckless projects and toxic debts, we need to change the ECGD now.
This article first appeared in Red Pepper.
Egypt's debt must fall with Mubarak's regime
The debts of Egypt and Tunisia must be cancelled if the people on the streets of Cairo and Tunis are to take control of their economy and hold Western countries to account
In the best tradition of dictators, Hosni Mubarak pillaged Egypt’s economy, and leaves office with as much as $70 billion in his family’s bank account while he bequeaths $30 billion in debt to the Egyptian people. Zine el Abidine Ben Ali leaves $15 billion to the people of Tunisia, taking a more modest $3 billion for himself. As more regimes come tumbling down, so these injustices will multiply.
The true creditors of Egypt, Tunisia and elsewhere are not the Western states who used loans to prop up their tough guys across the Arab world – they are the people of these countries who suffered under this rule. The West must now repay those debts by opening up their lending to public scrutiny, returning the assets of Mubarak and his cronies that have been banked in Europe and the US, and cancelling unjust debts across the Arab world. The Egyptian people must not continue to pay the bill for Western complicity through large debt repayments.
It is too easy for American and British leaders to issue warm words to the people of these police states who have endured corruption, torture and violations of human rights for decades. In fact Tony Blair has been the most honest appraiser of the situation. While most Western leaders dropped Mubarak so fast that you wonder how his desperately unpopular regime clung onto power for so long, Britain's former Prime Minister called his one time ally "immensely courageous and a force for good".
For the US and Europe, Mubarak was indeed an excellent client. Egypt repays its loans, many of which were undoubtedly run up in the interests of the regime rather than the people, at a rate of around $3 billion a year. This money has diverted what could otherwise have been used to improve the lives of ordinary Egyptians. Since 1981, Egypt has paid the equivalent of $80 billion dollars in debt and interest repayments, helping redistribute money from Egypt's poor to the global rich.
Some of the country's debt is undoubtedly military in nature. Egypt receives more US military support than any country in the world apart from Israel – well over $1 billion a year since Mubarak came to power in 1981. The British Government has allowed UK companies to supply Egypt with as much as £23 million ($37 million) of military equipment in 2008, £16 million ($26 million) in 2009. No doubt this came in useful when Egypt became a major centre for the US’s “war on terror” programme of kidnapping, secret flights and illegal detention and torture.
Egypt currently owes nearly £100 million ($160 million) to the UK. Although the Government refuses to say what Egypt's debt is based on, we know that it relates to British exports through the controversial Export Credits Guarantee Department, largely based on sales which took place early in Mubarak's rule. This shadowy Government department insures British business working in ‘risky’ parts of the world – usually supporting arms, aerospace and fossil fuel industries.
Tunisia faces a similar situation – under Zine el Abidine Ben Ali, the country made repayments well in excess of $40 billion. Again, Ben Ali served Western interests while suppressing his people who finally rose up against his rule in January.
When people have begun to take control of their countries in the past – from apartheid South Africa to Bolivia, from Argentina to Poland – debt has been used as a key means of forcing undemocratic economic policies on those countries. These policies have caused great pain and suffering to the poorest in those societies, and put a block on democracy extending in anyway into the economic sphere. If the revolutions in Tunisia and Egypt genuinely usher in a new era of independence for the people of those countries and if, as seems likely, the spark which has been lit in North Africa spreads across the Arab world, the next step will be holding to account those responsible for decades of kleptocratic and brutal rule.
As well as trying to recover money stolen by their former rulers, this means questioning the legitimacy of the debt that kept those rulers in power. It is time for the people's of North Africa to break their chains of debts which have already helped suppress freedom and development for a generation.
This article first appeared on: www.naomiklein.org/articles
In the best tradition of dictators, Hosni Mubarak pillaged Egypt’s economy, and leaves office with as much as $70 billion in his family’s bank account while he bequeaths $30 billion in debt to the Egyptian people. Zine el Abidine Ben Ali leaves $15 billion to the people of Tunisia, taking a more modest $3 billion for himself. As more regimes come tumbling down, so these injustices will multiply.
The true creditors of Egypt, Tunisia and elsewhere are not the Western states who used loans to prop up their tough guys across the Arab world – they are the people of these countries who suffered under this rule. The West must now repay those debts by opening up their lending to public scrutiny, returning the assets of Mubarak and his cronies that have been banked in Europe and the US, and cancelling unjust debts across the Arab world. The Egyptian people must not continue to pay the bill for Western complicity through large debt repayments.
It is too easy for American and British leaders to issue warm words to the people of these police states who have endured corruption, torture and violations of human rights for decades. In fact Tony Blair has been the most honest appraiser of the situation. While most Western leaders dropped Mubarak so fast that you wonder how his desperately unpopular regime clung onto power for so long, Britain's former Prime Minister called his one time ally "immensely courageous and a force for good".
For the US and Europe, Mubarak was indeed an excellent client. Egypt repays its loans, many of which were undoubtedly run up in the interests of the regime rather than the people, at a rate of around $3 billion a year. This money has diverted what could otherwise have been used to improve the lives of ordinary Egyptians. Since 1981, Egypt has paid the equivalent of $80 billion dollars in debt and interest repayments, helping redistribute money from Egypt's poor to the global rich.
Some of the country's debt is undoubtedly military in nature. Egypt receives more US military support than any country in the world apart from Israel – well over $1 billion a year since Mubarak came to power in 1981. The British Government has allowed UK companies to supply Egypt with as much as £23 million ($37 million) of military equipment in 2008, £16 million ($26 million) in 2009. No doubt this came in useful when Egypt became a major centre for the US’s “war on terror” programme of kidnapping, secret flights and illegal detention and torture.
Egypt currently owes nearly £100 million ($160 million) to the UK. Although the Government refuses to say what Egypt's debt is based on, we know that it relates to British exports through the controversial Export Credits Guarantee Department, largely based on sales which took place early in Mubarak's rule. This shadowy Government department insures British business working in ‘risky’ parts of the world – usually supporting arms, aerospace and fossil fuel industries.
Tunisia faces a similar situation – under Zine el Abidine Ben Ali, the country made repayments well in excess of $40 billion. Again, Ben Ali served Western interests while suppressing his people who finally rose up against his rule in January.
When people have begun to take control of their countries in the past – from apartheid South Africa to Bolivia, from Argentina to Poland – debt has been used as a key means of forcing undemocratic economic policies on those countries. These policies have caused great pain and suffering to the poorest in those societies, and put a block on democracy extending in anyway into the economic sphere. If the revolutions in Tunisia and Egypt genuinely usher in a new era of independence for the people of those countries and if, as seems likely, the spark which has been lit in North Africa spreads across the Arab world, the next step will be holding to account those responsible for decades of kleptocratic and brutal rule.
As well as trying to recover money stolen by their former rulers, this means questioning the legitimacy of the debt that kept those rulers in power. It is time for the people's of North Africa to break their chains of debts which have already helped suppress freedom and development for a generation.
This article first appeared on: www.naomiklein.org/articles
Wednesday, 5 May 2010
International Money Fiends
The International Monetary Fund devastated the developing world – and now it’s targeting eastern Europe.
It’s stripped millions of people of their livelihoods, but the global economic crisis has brought one institution back from the dead: the International Monetary Fund.
Two years ago, the IMF looked to be on its last legs. It had got to a stage where no-one wanted to borrow the Fund’s money anywhere. Many developing countries started accumulating reserves to avoid ever having to go to the IMF loan shark. Developed countries in trouble would go just about anywhere –
Then came the meltdown. Despite the fact that the IMF failed to see it coming – pretty damning for a body supposed to oversee global financial stability – bankrupt countries suddenly had no choice but to come begging.
In April last year, the G20 pumped the organisation with £330 billion worth of new funds. The radical Uruguayan writer Eduardo Galeano called the decision “black humour”, saying it would “rub salt in the wound" of countries hit by a crisis they did not create.
The IMF claims to have been reborn. It says it has mended its ways (without apologising for them) and will do things differently this time around.
Certainly there are discussions about changing its voting system, which currently assigns
But in depression-hit eastern Europe the IMF is rapidly becoming as hated as it once was in
In the 1980s at the height of the Third World Debt crisis, the IMF lent huge amounts of money to developing countries, allowing them to pay off their loans to banks who had recklessly lent in the 1970s. The banks got bailed out, while the poor paid the price. Exactly the same thing is now happening in
The fund has led a rescue package of 7.5 billion euros (£6.7 billion) – but the price is eye-watering austerity measures. Schools and hospitals are expected to close and the government has pledged to reduce maternity benefits and raise taxes. Wages have been slashed by up to 40 per cent.
In
In
Late last year,
Clearly the IMF is as much about power as economics. This is nowhere seen more clearly than in
The IMF is repeating history. But so too are the people, with street protests in Riga, the Latvian capital, becoming increasingly militant and a small-scale renewal of anti-IMF activism in the west. It looks like the seeds of the next wave of resistance are already in place.
This article first appeared in Red Pepper.
Thanks to the Bretton Woods Project for some of the information it contains.
Wednesday, 16 December 2009
Copenhagen: the sound of silence
By Nick Dearden and Tim Jones
The problem the Danish government faces gets bigger by the hour. Clearly the government is desperate for the UN climate summit in Copenhagen to be seen as a success, regardless of whether the deal done is capable of slowing down climate change in a just way. But it is faced with an ever-swelling army of critics who believe this issue is too important for a stitched-up compromise, negotiated late at night between corporate lobbyists and rich-country governments in conference hotel rooms.
Faced with seemingly irreconcilable positions – between developed countries who won't change their economic model and poor countries who realise that accepting the crumbs from the table is little use when faced with environmental devastation – any facade of consensus has broken down. Looking increasingly desperate, the authorities are trying to clamp down on all criticism in the hope that that will make it go away. In fact it is making it even more vocal.
For months the Danish government has been preparing to silence the critics – even approving new police powers to clamp down on protest. Last month we wrote to express our concern that these powers could easily be used to prevent those without a voice at the summit expressing themselves. The Danish government responded that "the new [police powers] will in no way affect peaceful demonstrators".
The sight of 1,000 activists being held in freezing temperatures without basic rights for many hours clearly exposes the Danish authorities' argument. So do reports of pepper spray being used on protesters held in cages, the constant raids on meetings and sleeping quarters, the arrest of a civil society spokesperson on the eve of yesterday's demonstration and the many more stories of serious infringements of civil liberties.
Time and again, we have seen that those incarcerated in unacceptable conditions were actually peaceful protesters – or even bystanders, in some cases. A member of our own staff taking pictures of a demonstration inquired what law he was being challenged under and was told: "It doesn't matter, you have no rights, you must do what I say or you will be arrested." The purpose, it seems is not directed at the threat of vandalism or violence but at protest per se.
This reflects exactly what is happening inside the conference centre, where criticism or alternative voices have been ignored and are now being silenced. Developing countries have felt so marginalised by a process clearly under the control of rich countries that they staged a walk-out on Tuesday. The same day the Danish prime minister Rasmussen sought to impose an agreement from above, killing off the legitimate negotiations and the binding Kyoto agreements. Rich countries have been trying to wriggle out of their emission reduction commitments throughout Copenhagen, and developing countries are right to resist.
Today, many developing countries are leaving the centre again to join protesters outside. Also today, civil society organisations including Friends of the Earth, Avaaz and Tck Tck Tck have been thrown out of the conference. Incredibly, delegates and media have been told they will lose their accreditation if they talk to these banned NGOs. No credible justification has been given for this behaviour.
But the real reason is simple – civil society groups ensure that the interests of ordinary people and the planet are not trampled on; at least not in silence. They have few resources to offer in comparison with the power of the corporate lobbyists inside the summit, many of whom will make a fortune if the free market "solutions" to climate change that they are advocating are to go ahead. Together with developing governments and protesters on the streets, civil society organisations are standing up against such deals, and making clear that only a radical, just solution will get us out of this mess.
Attempts to stop the voices of the protesters do not only ride roughshod over Denmark's reputation for upholding civil liberties, they also threaten to foist an unjust and ineffective climate deal on the world. The lives and livelihoods of millions of people across the world are at stake. They have a right to be heard. Silencing them is a crime of unimaginable proportions.
This article first appeared on the Guardian website.
The problem the Danish government faces gets bigger by the hour. Clearly the government is desperate for the UN climate summit in Copenhagen to be seen as a success, regardless of whether the deal done is capable of slowing down climate change in a just way. But it is faced with an ever-swelling army of critics who believe this issue is too important for a stitched-up compromise, negotiated late at night between corporate lobbyists and rich-country governments in conference hotel rooms.
Faced with seemingly irreconcilable positions – between developed countries who won't change their economic model and poor countries who realise that accepting the crumbs from the table is little use when faced with environmental devastation – any facade of consensus has broken down. Looking increasingly desperate, the authorities are trying to clamp down on all criticism in the hope that that will make it go away. In fact it is making it even more vocal.
For months the Danish government has been preparing to silence the critics – even approving new police powers to clamp down on protest. Last month we wrote to express our concern that these powers could easily be used to prevent those without a voice at the summit expressing themselves. The Danish government responded that "the new [police powers] will in no way affect peaceful demonstrators".
The sight of 1,000 activists being held in freezing temperatures without basic rights for many hours clearly exposes the Danish authorities' argument. So do reports of pepper spray being used on protesters held in cages, the constant raids on meetings and sleeping quarters, the arrest of a civil society spokesperson on the eve of yesterday's demonstration and the many more stories of serious infringements of civil liberties.
Time and again, we have seen that those incarcerated in unacceptable conditions were actually peaceful protesters – or even bystanders, in some cases. A member of our own staff taking pictures of a demonstration inquired what law he was being challenged under and was told: "It doesn't matter, you have no rights, you must do what I say or you will be arrested." The purpose, it seems is not directed at the threat of vandalism or violence but at protest per se.
This reflects exactly what is happening inside the conference centre, where criticism or alternative voices have been ignored and are now being silenced. Developing countries have felt so marginalised by a process clearly under the control of rich countries that they staged a walk-out on Tuesday. The same day the Danish prime minister Rasmussen sought to impose an agreement from above, killing off the legitimate negotiations and the binding Kyoto agreements. Rich countries have been trying to wriggle out of their emission reduction commitments throughout Copenhagen, and developing countries are right to resist.
Today, many developing countries are leaving the centre again to join protesters outside. Also today, civil society organisations including Friends of the Earth, Avaaz and Tck Tck Tck have been thrown out of the conference. Incredibly, delegates and media have been told they will lose their accreditation if they talk to these banned NGOs. No credible justification has been given for this behaviour.
But the real reason is simple – civil society groups ensure that the interests of ordinary people and the planet are not trampled on; at least not in silence. They have few resources to offer in comparison with the power of the corporate lobbyists inside the summit, many of whom will make a fortune if the free market "solutions" to climate change that they are advocating are to go ahead. Together with developing governments and protesters on the streets, civil society organisations are standing up against such deals, and making clear that only a radical, just solution will get us out of this mess.
Attempts to stop the voices of the protesters do not only ride roughshod over Denmark's reputation for upholding civil liberties, they also threaten to foist an unjust and ineffective climate deal on the world. The lives and livelihoods of millions of people across the world are at stake. They have a right to be heard. Silencing them is a crime of unimaginable proportions.
This article first appeared on the Guardian website.
Sunday, 15 November 2009
Developing Nations Unite Around Justice in Barcelona talks
by Nick Dearden and Tim Jones
The decision of African nations to walk-out of the Barcelona climate talks this week, and the support they received from other developing countries, proves that climate change is transforming global politics. The poorest countries in the world are refusing to sit by while their future right to development is negotiated away by vested interests in rich countries.
Developing countries have rediscovered a unity in recent months which is capable of shaking western complacency in a more fundamental way even than the collapse of WTO talks in Seattle 10 years ago. And their argument has an authority which will draw support from citizens right around the world – because at its core is a call for justice, summed up by the concept of ‘climate debt’.
It isn’t simply a matter of asking the rich world to pay for the devastation climate change is causing in the developing world. As a report recently launched by World Development Movement and Jubilee Debt Campaign points out, ‘climate debt’ questions a global free market system which has pushed many developing countries into high carbon pathways that they now need to find a way out of.
Through enormous debt burdens, through aid and lending and through trade rules, rich countries and their spokesmen in the IMF and World Bank have forced policies on developing countries which have created carbon addiction. These policies have led to more oil and coal being dug up, more trees being chopped down, more food being grown on massive farms to export to the West, more dependency on fossil fuels for electricity needs.
Indonesia is home to the world’s third largest area of tropical forest and faces a huge problem of deforestation – it accounts for 70% of the country’s carbon emissions. Indonesia’s timber trade boomed under the corrupt President Suharto, as he looked for ways of repaying the enormous loans flowing into the country from his western backers. Suharto liberalised investment regulations, allowing foreign companies to become key players in the destruction of forests and export of timber.
When the IMF waded into Indonesia’s financial crash in 1997, it infamously told the government to cut government spending (the very opposite of how our own governments have dealt with the financial crisis), forcing cuts in environmental protection which left forest resources vulnerable to private operators. It also told the government to remove restrictions on foreign investment in palm oil plantations, causing rampant deforestation and destruction of peat land.
Meanwhile, Nicaragua faced demands to privatise its electricity sector as a condition of receiving debt relief from the IMF and World Bank. Short-term this actually reduced Nicaragua’s carbon emissions – in the most regressive way possible – by increasing the average electricity bill by 100-400% and pricing the poor out of the market. But long-term it has increased the country’s fossil fuel addiction, because private companies are far less likely to put in the investment needed to create a renewable energy base.
Since the mid-1990s, the proportion of Nicaragua’s electricity coming from oil has increased from 55% to over 70%, while electricity from renewables has fallen. In contrast, Nicaragua’s neighbour Costa Rica has maintained a public, not-for-profit electricity system and the country gets 94% of its electricity from renewable sources.
Likewise, Ecuador has massively extended its oil production over the last 20 years, with the IMF seeing oil as a key way of Ecuador repaying its mountain of debt, itself based on loans irresponsibly lent to its military junta in the 1970s. This oil has done little for Ecuador – the IMF demanded 70% of oil revenues be earmarked for debt servicing, and no more than 10% for social spending. When current President Correa increased the proportion flowing into the social sector IMF loans were cancelled.
The examples go on, adding to the rich world’s ‘climate debt’, which we need to pay to enable developing countries to rid themselves of poverty, but in a less carbon-intensive way then we did. Our new report estimates that the UK – accountable for 6% of historical emissions – needs to make massive cuts in emissions. By rights, it is we who have used up our allowance – we are already carbon bankrupt. To make up for this fact we believe that the UK owes £660billion – which could be repaid as just under £17billion a year through to 2050. A huge amount – but on the other hand it is only 1% of our national income, which has been built up by carbon intensive industry, and less than the Lloyds group was given in its bail-out package. A small price to pay for a habitable planet.
But the rich world fails to understand that climate change will not be solved by throwing a few loans the way of the starving and destitute. Indeed their solution is an avalanche of new loans to developing countries who are already repaying debts at a rate of 5 times what they receive in aid every year. And to oversee these loans will stand the World Bank – an institution at the very heart of carbon-fuelled growth and Third World debt. As Central American activist Ricardo Navarro commented recently “I would rather that the UK government bought flowers for every household in the UK than spend this money on a World Bank coal fund."
Of course the concept of climate debt scares many – the same vested interests referred to earlier. Arch-climate-change-denier and former Thatcher government advisor Lord Muncton even described it as a blueprint for “world communist government”. Doubtless many saw Roosevelt’s New Deal or the creation of the welfare state in the same way. Certainly it implies fundamental changes in the global economy, radical redistribution of the world’s resources.
But the alternative is not ‘merely’ the continuation of gross inequality and shameful levels of poverty in a world rich in resources. It is the ability of all of us to inhabit our planet.
This article first appeared on UN-NGLS.
Thursday, 15 October 2009
Radicals return to the UN
After 30 years of marginalisation, commentators from across the world are hailing the United Nations conference on the economic crisis as a new opportunity for progressive change. While the June summit’s outcomes were not as radical as many would have liked, the battles that took place between rich and poor countries hold out some hope for the enfranchisement of the majority world – the global South.
Southern governments demanded the conference as the economic crisis started to grip the world last November. Despite repeated offers by UN secretary general Ban Ki-Moon to host talks on the crisis, rich countries have preferred their own company. They have, however, used the relatively unheard of G20, rather than the G8, to add a sprinkling of legitimacy to decisions – and, more importantly, because the financial reserves of countries such as China and Saudi Arabia are essential to stimulating the global economy.
The fightback on behalf of the UN was led by Latin American countries. After months of attempts by rich countries to downplay and delegitimise the summit, it finally happened on 26 June.
Central to the process was the president of the UN general assembly, Reverend Miguel d’Escoto Brockmann. D’Escoto, a leftist priest from Nicaragua, enraged rich countries by offering a radical paper for nations to debate that declared ‘globalisation without effective global or regional institutions is leading the world into chaos’.
That this former Sandinista foreign minister should encourage 192 countries to air their views on matters of global importance caused the British – and other western delegations – a touch of indigestion. A suitable programme to discredit d’Escoto was launched. Rich country diplomats told Reuters that the UN summit was a ‘joke’, a ‘tragedy’ and a ‘waste of time,’ accusing d’Escoto of hijacking the conference in order to put capitalism on trial and threatening to boycott it.
D’Escoto replied that rich countries could not control the conference and that ‘it must speak to the hundreds of millions across the globe who have no other forum in which they can express their unique and often divergent perspectives.’ He warned countries not to turn the UN summit into an ‘international charade’, adding, ‘I earnestly believe that this is an opportunity the world cannot afford not to take advantage of.’
The UN versus the G8
Western hostility could be clearly seen in the level of representation they sent. Gordon Brown, Barack Obama and other western leaders shunned the summit, but found the time to turn up to the annual photoshoot known as the G8, which met only two weeks later in L’Aquila, Italy.
The G8 discussed aid, climate change and energy security, keeping announcements firmly within the western comfort zone, trying to pre-empt a UN agreement on climate change in December and refusing to subject itself to criticism from upstart countries.
But then this is exactly the point of the G8 and always has been. The G6, forerunner to the G8, first met in Rambouillet in 1975, amid another economic crisis and with the aim of excluding the majority of the world from decision-making. In 1974 the troublesome UN general assembly had passed a far-reaching proposal for economic reform, the ‘new international economic order’, that outraged the west.
Had the world listened to the calls for change in the 1970s – for corporate regulation, fair prices for raw materials and equitable trade rules – we would not have embarked upon the three decades of free market fundamentalism that have brought the economy and environment to breaking point.
Structural reforms
The UN was a thorn in the side of western leaders for decades from the 1950s, hence their strong desire not to go back to those days. Perhaps it was no surprise, then, that proposals to the UN conference on the economic crisis looked so different to the business-as-usual agenda set out by the G8 in Italy, and indeed the G20 at the London summit in April.
Central to that G20 agreement was the resuscitation of the International Monetary Fund (IMF). The institution has been promised £450 billion (though much of this is still to be seen), very little of which is for the poorest countries.
In addition, of course, the IMF is a deeply flawed institution, which seems to have learned little in the 10 years since its policy impositions turned a disaster into a crisis in south-east Asia. A recent report by the European Network on Debt and Development (Eurodad), ‘Bail-out or blow-out?’, shows that, of 10 recent IMF loans to low-income countries, all required spending cuts, five mandated wage bill freezes or cuts, five forced governments to pass on food or fuel price rises to citizens and all include some sort of structural reforms such as privatisation, increases in indirect taxation or trade liberalisation.
The rest of the money promised by the G20 is for ‘export finance’ – helping companies to invest overseas. In the UK this means the infamous export credit guarantee department, which has used taxpayers’ money to hold up the British arms industry for decades.
At the UN, meanwhile, former World Bank chief economist turned globalisation critic Joseph Stiglitz put forward a range of structural reforms on behalf of President d’Escoto. He was clear that ‘the international trade and financial system needs to be profoundly reformed.’ The Stiglitz commission recommended a powerful global economic co-ordination council at the UN to bring the World Bank and IMF to heel, an end to the practice of forcing economic policies on developing countries, an international debt work-out process that would allow for far greater and fairer debt cancellation and a new reserve currency to replace the dollar.
Agreeing with many developing countries, Stiglitz was said that ‘without a truly inclusive response, recognising the importance of all countries in the reform process, global economic stability cannot be restored.’
Moving away from the self-selected club
The final result was – predictably, given the intransigence of rich countries – less radical. The conference agreed few concrete measures, short of setting up a working group to examine many of the issues raised – though this itself is an important step forward. The conference also laid the blame for the economic crisis firmly at the feet of the developed world, conceded rights to developing countries in terms of economic sovereignty and acknowledged that many countries were unhappy with the dollar as global reserve currency.
Sadly this was too much for the US, which promptly started distancing itself from a document it had just agreed to.
The real significance comes not in the formal agreement, however, but in the fact that the conference took place in the teeth of such strong opposition. As Stiglitz said: ‘The UN showed that decision-making needn’t be restricted to a self-selected club, lacking political legitimacy, and largely dominated by those who had considerable responsibility for the crisis in the first place.’
Unlike the G20 or G8, negotiations at the UN were transparent and open to civil society groups across the world. Moreover, developing countries have shown themselves able, for the first time in many years, to express a common vision of a more equitable world. The G77 plus China group (actually a group of 130 developing countries) has shown a remarkable level of unity over the economic crisis and climate change.
Forum for alternatives
The weakness of the UN has led some social movements to sharply criticise its usefulness in bringing about radical change. It is no wonder some regard the UN as a tool for imperialism given its recent history and championing of initiatives such as the Global Compact – a weak and unenforceable code on companies that turns the likes of Coca-Cola, Nestlé and BP into ‘good corporate citizens’. But the crisis summit shows, at least, that the UN can be a forum for an alternative economic and political agenda.
The UN is something that can and should be fought over – not simply conceded by ordinary people and developing world states to the powerful. There are still UN institutions that consistently produce radical analyses of the world economy. If developing countries can find the unity to fight for it, real change is achievable. For example, China’s criticism of dollar hegemony makes massive changes in the global financial system possible, ending the insane system whereby China and other developing counties continue to fuel US over-consumption by effectively lending it trillions of dollars at low rates of interest.
While western leaders may scoff at D’Escoto’s words, they can surely provide a rallying cry for hundreds of millions of people across the world: ‘The anti-values of greed, individualism and exclusion should be replaced by solidarity, common good and inclusion. The objective of our economic and social activity should not be the limitless, endless, mindless accumulation of wealth in a profit-centred economy but rather a people-centred economy that guarantees human needs, human rights, and human security, as well as conserves life on earth. These should be universal values that underpin our ethical and moral responsibility.’
As we head towards the Copenhagen climate summit, as the economic crisis further devastates Southern economies, the UN might again become a battleground on which we can win important victories.
This article first appeared in Red Pepper.
Monday, 14 September 2009
Time to ditch the dollar
Emerging states such as China, Russia, and Brazil have finally had enough of the rule of the dollar. When Alistair Darling meets his counterparts at the G20 finance ministers' meeting this weekend, he should join them and right this "exorbitant privilege" that allows US overconsumption to be subsidised by the rest of the world.
The centrality of the dollar was built into the postwar Bretton Woods economic system, but in the early 1970s Europeans became concerned that the US, by printing money to fund the Vietnam war, was endangering their own dollar holdings, which were losing value compared to gold. In 1971 a French battleship arrived in New York full of dollars to exchange for gold, with the British following suit.
Four days later, President Nixon took radical action. The "Nixon Shock" was that from then on the dollar would not be linked to the value of gold. Rather the dollar was the new gold – and it alone was used to facilitate trade, measure international prices and allow countries to build up protection for their economies.
Following the Asian financial crisis of 1997, dollars become increasingly important to developing economies. Burned by their experience of taking International Monetary Fund (IMF) loans and the devastating impact of the economic conditions that institution imposed on them, they started buying dollars (in the form of US Treasury bonds) as an insurance policy against ever having to go to the IMF again.
In effect this meant that poor countries were, and still are, lending money to the US at very low rates of interest. Rather than ploughing money into their own economies, they are fuelling consumption in the richest country on earth. In 2007 total dollar reserves held by developing countries amounted to $3.7tn (£2.3tn).
Radical developing world leaders such as Hugo Chávez have long bemoaned the impact of "dollar imperialism", especially the pricing of oil in dollars, which means that countries can't buy oil without propping up the US economy. But he has now been joined by China, fearful of the collapse in value of its own massive reserves estimated at nearly $2tn, and Nobel-laureate Joseph Stiglitz, who recently chaired a UN commission that recommended the replacement of the dollar as global reserve.
Last week Stiglitz told Americans that it was not merely that "there is something a little unseemly about poor countries lending the United States trillions of dollars, now at an interest rate of close to zero" but it also damaged the US because "we are exporting T[reasury]-bills rather than automobiles, and exporting T-bills doesn't create jobs."
Reformers are not asking for the dollar to be replaced by an alternative national currency. That would simply tie the global reserve to the domestic politics of a different country. But they do believe the IMF's own "currency" known as special drawing rights (SDRs) could show the way to a better solution.
SDRs give countries a level of theoretical reserves that can be traded for hard currency on payment of interest. Last week the IMF took the unusual step of issuing $250bn worth of SDRs at the behest of the G20 as a way of helping ease the global economic crisis.
But for SDRs to play the role of global reserve currency would require that they be controlled by a very different institution from the current IMF. As things stand, SDR issues are rare and when they are made they reflect the voting share of countries in the IMF. Hence of last week's $250bn, less than $100bn will go to developing countries and a measly $19bn to low income countries. The IMF ignored civil society pressure that the distribution should be fairer, that interest rates for use of SDRs by low income countries be eliminated and that transfer of SDRs from rich to poor countries be encouraged.
But this doesn't mean the IMF's action has nothing useful to offer. A new institution – a global reserve bank – could be established that would regularly issue an international currency like the SDR to those who need it most and at times (such as recession) when it is needed most.
The global reserve currency would no longer be tied to the volatile exchange rate of a national economy, making it more stable, and poor countries would not have to spend precious funds insuring their economies against collapse. And, if tied to a new global framework, such a mechanism could ensure that debtor and creditor countries share responsibility for returning the economy to equilibrium by discouraging large deficits and excessive surpluses.
These ideas are not a million miles from those of John Maynard Keynes in 1944; ideas that were squashed by the US when it created the IMF. With the age of the dollar nearing its end, we must ensure that its replacement helps create a fairer and more stable world.
This article was first published on the Guardian Comment is Free.
Monday, 24 August 2009
Iceland proves that the debtor has rights too
Recent events in Iceland may have completed that country's transformation from free market, credit-fuelled billionaire playground to champion underdog. The Icelandic Parliament’s offer to the UK and Dutch governments earlier this week that it will pay back its debts but only at a level it can afford, could provide an invaluable model for how indebted nations can start putting the needs of their people ahead of the desires of the global financial markets.
Iceland has become synonymous with the financial crisis after nearly a decade of drinking neo-liberal kool aid. Around 2000 Iceland went on a deregulation and privatisation binge, totally reforming its financial sector, dropping bank reserve requirements, raising interest rates sharply, sucking in foreign capital and encouraging massive borrowing. It lived the dream being promoted by most European capitals at the time. So many millionaires flew into tiny Rejavik that a local politician demanded limitations on planes coming into the country.
Such a highly indebted financial system was, unsurprisingly, an early victim of the credit crunch, even though Iceland was not invested in sub-prime loans. Their situation was certainly not helped by Gordon Brown – proponent of the very policies Iceland had slavishly followed – who designated the country a terrorist state last October in order to seize Iceland’s banking assets in the UK. His attempt to derive popularity amongst investors at home neatly side-stepped the failure of UK authorities to adequately regulate UK investment.
The enormous anger that followed in Iceland toppled the government, and since then has radically reduced support in Iceland for the country’s membership of the EU. Most recently ordinary citizens have pushed members of the ruling coalition and opposition parties into opposing the enormous repayments being demanded by the British and Dutch governments.
That is the background to the decision earlier in the week of the Icelandic Parliament – the Althing –that it would repay its debts, but only at a rate it could afford. That is defined as spending no more than 4% growth in GDP to repay UK debts (and 2% for Dutch debts). If the economy doesn’t grow (because of inappropriate conditions forced on the country by creditors for example) Iceland pays nothing.
This decision, if implemented, is historical. Michael Hudson, Professor of Economics at the University of Missouri, has said that it is the first agreement “since the 1920s to subordinate foreign debt to the country’s ability to pay”. Hudson is referring to the 1920s debate that raged over capping Germany’s First World War reparations repayments. Keynes argued at the time that insisting on debt repayments beyond a level which also allowed the country to grow would inevitably mean forcing Germany to sell its assets or alternatively to borrow more money. He predicted the subsequent anger and discontent caused in Germany, which led straight into World War II.
But the situation which Iceland is trying to deal with is one which has faced scores of developing countries for decades – countries with less responsibility for the current mess than Iceland. Many countries still have to pay unreasonable levels of debt by selling off assets, skewing their economy towards unsustainable export trade and foregoing their right to development.
Iceland is correct to assert that states in debt have rights that trump the rights of creditors to bleed their economies dry. When companies and municipalities become insolvent, they are protected by work-out laws – but no such work-out mechanism exists when it comes to countries.
If limiting Iceland’s debt repayments is right, the same must apply, to an even greater extent, to poorer countries. Lebanon spends over 50% of government expenditure in servicing debts, Uruguay 32% and the Philippines 31%. These states top a much longer list of developing countries who understand from experience the injustice of indebtedness better than any European government.
Iceland has led the way in standing up for the rights of debtors. It may be followed by a range of indebted Eastern European countries who are also currently having their economic policies dictated to them by the International Monetary Fund.
This article was first published in the Morning Star.
Iceland has become synonymous with the financial crisis after nearly a decade of drinking neo-liberal kool aid. Around 2000 Iceland went on a deregulation and privatisation binge, totally reforming its financial sector, dropping bank reserve requirements, raising interest rates sharply, sucking in foreign capital and encouraging massive borrowing. It lived the dream being promoted by most European capitals at the time. So many millionaires flew into tiny Rejavik that a local politician demanded limitations on planes coming into the country.
Such a highly indebted financial system was, unsurprisingly, an early victim of the credit crunch, even though Iceland was not invested in sub-prime loans. Their situation was certainly not helped by Gordon Brown – proponent of the very policies Iceland had slavishly followed – who designated the country a terrorist state last October in order to seize Iceland’s banking assets in the UK. His attempt to derive popularity amongst investors at home neatly side-stepped the failure of UK authorities to adequately regulate UK investment.
The enormous anger that followed in Iceland toppled the government, and since then has radically reduced support in Iceland for the country’s membership of the EU. Most recently ordinary citizens have pushed members of the ruling coalition and opposition parties into opposing the enormous repayments being demanded by the British and Dutch governments.
That is the background to the decision earlier in the week of the Icelandic Parliament – the Althing –that it would repay its debts, but only at a rate it could afford. That is defined as spending no more than 4% growth in GDP to repay UK debts (and 2% for Dutch debts). If the economy doesn’t grow (because of inappropriate conditions forced on the country by creditors for example) Iceland pays nothing.
This decision, if implemented, is historical. Michael Hudson, Professor of Economics at the University of Missouri, has said that it is the first agreement “since the 1920s to subordinate foreign debt to the country’s ability to pay”. Hudson is referring to the 1920s debate that raged over capping Germany’s First World War reparations repayments. Keynes argued at the time that insisting on debt repayments beyond a level which also allowed the country to grow would inevitably mean forcing Germany to sell its assets or alternatively to borrow more money. He predicted the subsequent anger and discontent caused in Germany, which led straight into World War II.
But the situation which Iceland is trying to deal with is one which has faced scores of developing countries for decades – countries with less responsibility for the current mess than Iceland. Many countries still have to pay unreasonable levels of debt by selling off assets, skewing their economy towards unsustainable export trade and foregoing their right to development.
Iceland is correct to assert that states in debt have rights that trump the rights of creditors to bleed their economies dry. When companies and municipalities become insolvent, they are protected by work-out laws – but no such work-out mechanism exists when it comes to countries.
If limiting Iceland’s debt repayments is right, the same must apply, to an even greater extent, to poorer countries. Lebanon spends over 50% of government expenditure in servicing debts, Uruguay 32% and the Philippines 31%. These states top a much longer list of developing countries who understand from experience the injustice of indebtedness better than any European government.
Iceland has led the way in standing up for the rights of debtors. It may be followed by a range of indebted Eastern European countries who are also currently having their economic policies dictated to them by the International Monetary Fund.
This article was first published in the Morning Star.
Sunday, 2 August 2009
Vultures who scavenge off the living
The financial sector may be low on fans in the current climate, but even at a party of bank managers, vulture funds would probably find themselves standing alone by the canapes.
Vulture funds - otherwise known as distressed debt funds - feed off the very poorest. Usually based in tax havens, these funds buy up developing country debts for a fraction of their real value and then sue the country in question for full immediate repayment, making massive profits in the process.
Unsurprisingly, companies suing developing countries often find themselves popular targets for Western campaigners.
In 2003, owner of Iceland supermarkets The Big Food Group was suing Guyana for over £12 million but dropped the case after an outcry from debt campaigners. In December 2002, Nestle dropped a similar claim of $6m (£3.6m) against Ethiopia.
But vultures are less well-known than Iceland or Nestle. As a result, so are the cases that they fight and - all too often - win. Even more shocking is the fact that well over half of these cases are fought in US or British courts.
Vultures were seen in action in 1997 when a company called Donegal, a vulture registered in the British Virgin Islands, sued Zambia in the High Court for $55m (£33m) on a debt it had bought for $3m (£1.8m).
This debt was generated as far back as 1979, when Zambia was lent $15m (£8.9m) by Romania in order to buy Romanian tractors and other farming machinery. Twenty years later, Zambia was unable to repay its debts and became eligible for debt relief. The Zambian and Romanian governments were negotiating the cancellation of the tractor debt as part of this process.
Enter Donegal International, a fund set up purely to purchase this debt and run by US businessman Michael Sheehan - otherwise known as "Goldfinger."
Donegal was able to purchase the debt from Romania for $3.3m (£1.9m) and then sue Zambia in British courts for the full $55m - eventually winning $15m (£8.9m) in 2007.
In essence, some of the recent debt relief that Zambia had been given by countries like Britain was snatched back by a vulture fund.
Zambia is far from alone. The International Monetary Fund claims that at least 54 companies have taken legal action against 12 of the world's poorest countries, for claims amounting to $1.5 billion (£900m).
Vulture action is ongoing against Ethiopia, Cameroon, the Democratic Republic of Congo and others.
A company called FG Hemisphere has been awarded $100 million (£59.8m) against the Democratic Republic of Congo and is now seeking the money in jurisdictions including Hong Kong, South Africa and the US.
The company recently won a court order in the US for fines of up to $80,000 (£47,860) a week against the war-torn DRC after it failed to disclose all of its assets across the world.
And even this isn't the whole picture. It doesn't include, for instance, "less poor" countries such as Argentina, which is facing a case brought by a vulture fund called NML.
NML bought Argentinian bonds that were defaulted on during the country's 2001 financial meltdown. It is currently using British courts to try to recover payment against assets that Argentina might have in Britain.
So it was particularly good news when the British government announced its intention last week to prevent these funds - in effect - from using British courts. The government's proposal is to apply the same terms to vulture-fund cases as are applied to all other creditors of countries deemed eligible for debt relief. So when cases come up before British courts, a large proportion of debt relief would be deducted from the total figure of the debt they seek to reclaim and vulture activity would become pointless.
Even better, in the US, Democrat Congresswoman Maxine Waters is leading the charge to ensure that vultures cannot use US courts to "profiteer," which is defined as making more than 6 per cent interest on any debt that is bought.
So this could be the end of the road for the vultures. It will certainly put a deep hole in their profits. But the case hasn't been won yet.
The government's consultation is open until October 8, and heavy lobbying can be expected from some in the financial sector. Moreover, the government's proposal only covers very poor countries which are eligible for debt relief.
The legislation will not come a moment too soon. As more and more countries fall into debt and the economic crisis worsens, vulture funds might seem like a recession-proof career.
"Vulture" is actually a somewhat favourable term for companies that scavenge not off the dead but the living. Closing them down is one small step towards combating the secrecy and irresponsibility of the financial system as a whole.
This article first appeared in the Morning Star.
Wednesday, 29 July 2009
Time to pay our climate debt
You can't blame developing countries for a lack of ambition when their solutions are much bolder than anything the G8 came up with. Two weeks ago the G8 summit came to a supposedly ‘groundbreaking' agreement on climate change. They were only let down, so the story goes, by developing country governments unwilling to commit themselves to bold enough cuts in their own carbon emission targets.
What actually happened was quite different, but the post-summit spin will be repeated again and again in the run-up to the United Nations Copenhagen Summit on climate change in December.
It should be familiar to us from World Trade Organisation talks over the last decade or more: while rich countries fail to agree on meaningful, let alone ambitious, reforms, larger developing countries are blamed for a ‘lack of ambition'. Indeed one of Government Minister Ed Milliband's key challenges for the year is apparently to get developing countries to "move away from business as usual".
The hypocrisy springs from an inability, or unwillingness, to grasp the nature of the environmental problem. Developing countries do not have primary responsibility for causing climate change, though their prospects for development are seriously hindered by it. That's why countries like Bolivia are proposing real solutions, and ones which terrify Western leaders: you can't, they believe, deal with climate change unless you accept that rich countries are in significant debt to the poorest and embrace the concept of redistribution.
Their argument is simple and based on a premise which isn't disputed. The rich world has gobbled up far more than its fair share of the earth's atmosphere in order to develop. In essence, industrialised countries colonised the atmosphere, in the same way they did other resources.
Those rich countries now owe poorer countries a two-fold ‘climate debt': first for over-using the Earth's capacity to absorb greenhouse gases and thereby denying atmospheric space to those who need it most. Second, they're in debt for the destruction that those emissions are causing.
The solution: rich countries need to ‘pay' through redistributing a fairer share of limited atmospheric space to poorer countries, as well as helping those countries adapt to the mess they find themselves in. Environmental justice is little different from other forms of economic justice - redistribute resources so that those who've lost out from a specific model enjoy the same benefits as those who've done well from it.
But ‘those who've done well' often don't see things in the same way. The limited and hazy agreements made by the G8 go nowhere near a fair distribution of the earth's atmosphere. Right up to 2050, even if an 80% cut in emissions were to be implemented, the G8 will consume far more of the earth's limited resources than they deserve, such is the scale of their current over-use.
The G8 could get away with cutting emissions by less than they should because they are demanding steep developing country cuts as well - recognising the need for overall emissions to shrink. In effect, developing countries would ‘subsidise' the necessary reduction which rich countries should really be taking, thereby preventing the developing world accessing the environmental space they need to build decent standards of living.
The climate debt of the rich world would just keep getting bigger. But rather like the banks who gambled with the future of millions of people, the richest propose that many of their debts to the poor simply be written off.
Payment of the other part of the debt - to help clean up the mess - is even further ‘off track', with tiny amounts of money committed to helping developing countries adapt and develop (or share, through relaxed intellectual property rights) new technologies to help their lower-carbon growth. Instead, proposals on the table to date include large quantities of new loans (so the real creditors become the debtors in economic terms) run through the World Bank, an institution which has championed high carbon growth for decades.
So the battle lines are drawn. Developing countries will not sit idly by while the rich go on consuming their dwindling chances for development and justice. They don't see why they should make the first move - sacrificing their own development before the rich pay off their debts.
That's why Bolivia has received substantial support for its proposals from a range of developing countries. Developed countries will spend the next six months in the run-up to the Copenhagen summit trying to marginalise these countries - doubtless with a good bit of bribery and arm-twisting along the way, helping them to meet the ‘ambition' the rich feel that the poor somehow owe them.
Of course, achieving a just outcome would not be easy. Predicting the future impacts of climate change is very difficult. Moreover, it would mean big changes to the way those who currently run the world live, and more political vision than we've seen for many decades. But the principles are clear: that the polluter pays for the excessive consumption of the rich, not the poor, and that in a civilised society redistribution is a critical way of righting historical injustice.
The developing world has set out its ambitious agenda. It's for us to move away from business as usual if we're to come close to meeting it.
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