DEBT - The Next Cause Celebre?
by Iain Guest
With India exploding bombs and Indonesia exploding, the Group of Eight leaders needed prodding when they met for their recent economic summit in Birmingham, England. They got it in spades when 70,000 protesters took to the streets to demand the lifting of third-world debt. They were part of a growing international campaign called Jubilee 2000.
It is hard to imagine that an issue like debt relief could bring out the crowds. But politicians should beware. They may be facing another international coalition similar to that on landmines, which won last year's Nobel peace prize. Third-world debt evidently triggers a powerful sense of outrage at the hypocrisy in international economic relations, exemplified by the contrast between the treatment of Asia and Africa.
The economic bailout of Asia shows that the Group of Eight can move swiftly when it comes to keeping their investors purring and preserving the almighty stock market. Helped by calls from the White House, the International Monetary Fund has been able to muster over $120 billion for just three Asian nations - Thailand, South Korea, and Indonesia. Even the World Bank bent its own rules and offered $3 billion to South Korea.
Contrast this with the limping efforts to relieve third-world debt. In 1996, the World Bank and IMF were given the green light to cancel $7 billion of debt owed by 20 poor nations known as Heavily Indebted Poor Countries (HIPC). This rescue plan is minuscule compared with the Asian bailout, but it is arguably more justifiable. The total outstanding debt of these countries is $100 billion - it acts as a massive brake on development. Africa spends four times as much servicing debt as it does on health and education.
Would debt relief translate into social spending? Uganda has shown that it can happen with the right kind of international guidance and an honest government. The World Bank-IMF HIPC initiative holds governments to extraordinarily tight conditions.
HIPC amounts to a breakthrough in international economic relations. It is the first time that multilateral debt is viewed as a problem common to several nations, and the first time the international community attempts an integrated solution. The current approach, by which individual governments are confronted by "clubs" of creditors, is widely resented.
Thus far, however, only $3 billion has been earmarked for six countries under HIPC - Uganda, Bolivia, Ivory Coast, Mozambique, Mali, and Burkina Faso. Only Uganda and Bolivia will see money this year. Germany, Italy, and the US have been dragging their feet. Even the IMF - contributing $800 million to HIPC - has been lukewarm. Organizations like Oxfam, a HIPC campaign leader, feel that the initiative is running out of steam.
The US line is that forgiving debt erodes international economic discipline. The fiasco in Asia has turned this logic on its head and shown that the poor are often more disciplined than the rich. For sheer corruption, few could compare to Suharto's Indonesia. Yet it was Indonesia that secured the $43 billion bailout in days, while Africa must wait years for a fraction of that amount.
Governments like Uganda have shown that under HIPC, controlled debt relief doesn't trigger widespread default. It can also be a good use of taxpayers' money. President Clinton promised Uganda $120 million for education during his African trip. If the US had only signed on to the initiative a year earlier instead of fighting it, Uganda would already have $193 million for education - the amount it paid out on debt repayments.
It is easy to understand why the Jubilee 2000 campaigners are outraged. If bankers and politicians can't make proper use of our money then we - the people - should deny them the privilege, and start demanding a greater say in global economic policy.
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