Cancel all Third World debt!

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Cancel all Third World debt!

By Zanny Begg

In 1992, a memo by the World Bank's chief economist and vice-president Lawrence Summers was leaked to the media. In it Lawrence asked, "Shouldn't the World Bank be encouraging more migration of the dirty industries to the less developed countries? Health impairing pollution should be done in the country with the lowest cost, which will also be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lower wage countries is impeccable and we should face up to that."

Outraged by Summers' callous attitude, many called for his resignation. But his memo merely revealed the brutal logic of the capitalist economic system.

We live in a world where, for a tiny minority, it makes economic sense to dump pollution in the Third World because, according to powerful institutions like the World Bank, the lives of people in the Third World are worth less.

As Summers explained: "Concern over [pollution] that causes a one-in-a-million change in the odds of prostrate cancer is obviously going to be higher in a country where people survive to get prostrate cancer than in a country where the under-five mortality rate is 200 per thousand".

The Third World debt crisis illustrates the brutality of capitalism. During the 1970s, the rulers of poor countries found it easy to borrow money from the banks in North America, Europe, Australia and Japan. Millions of dollars poured into investment projects, many of which were of little benefit to the people. Corrupt, Western-backed ruling elites invested in projects like sports stadiums, weapons, roads and dams.

As the post-war boom faltered in the late-1970s, the US hiked up interest rates. This caused the debt crisis, which formally began in 1982 when Mexico found itself unable to meet its debt repayments.

During the 1980s, more than 80 countries were forced into "structural adjustment programs" which redirected government spending on social services and education towards debt "minimisation". The debt crisis was used as a lever to prise open the economies of recalcitrant countries and allow powerful Western corporations to displace domestic companies.

Meanwhile, the West shifted responsibility for the loans from private commercial banks to public institutions like the World Bank. In 1985, commercial banks held 49% of the Third World debt and official agencies 36%; by 1993 the tables had turned and the banks held 35% and official financial institutions 45%.

Today, the world's poorest countries are caught in a debt trap, unable to make even the interest payments on their loans. Despite 10 years of austerity budgets, the debt owed by the Third World has grown by two-thirds over the same period.

In 1985, Mozambique owed US$929.9 million to the industrialised countries, today it owes $2 billion. This debt has not grown because Mozambique has continued to borrow money — it has been prohibited from doing so. Its debt has ballooned because of the interest it owes on the original loan.

Last year, poor countries paid $270 billion in interest payments — $60 for every man, woman and child. The West claims it gives humanitarian "aid" to the Third World. It does no such thing. For every dollar paid in aid to poor countries, $9 is returned in interest payments on loans.

Even the original decision to lend money to the poor countries did not spring from humanitarian concern. The West lent this money for strategic reasons. The Cold War between the US-led West and the Soviet Union and other socialist countries made every country, however small, important on the global map.

The Western powers wanted to prevent the spread of "communism" and used their vast economic muscle to interfere in the internal affairs of every country on the planet. It promised economic "development" to Third World regimes willing to play by its rules.

Loans were used to promote investments considered profitable by Western companies, to build infrastructure essential for the development of Western business in underdeveloped countries and to shore up regimes friendly to imperialism.

The wealth concentrated in the West, which made it able to "lend" money to the Third World, was obtained by theft. The present division of the world between industrialised nations and "underdeveloped" nations is not because of an inherent superiority of the West. It is the result of the surplus value that is extracted from waged workers hired by the capitalists and the resources stolen from the Third World.

It has been estimated that the Spanish stole more than 500 million pesos from Latin America between 1503 and 1660. Slaves in the British West Indies were robbed of £200-300 million pounds in "free" labour. The Dutch East India Company stole the equivalent of around 600 million gold florins between 1650 and 1780. These fortunes laid the basis for capitalist economic development in the rich industrialised countries.

The capital accumulated through this plunder laid the foundations for the industrial revolution. Industrialisation massively widened the gap between the rich and poor countries, making it irreversible under capitalist models of development.

According to well-known author Susan George, the gap between the wealth of the rich and poor countries in the 18th century was 2:1. After World War II, this gap had grown to 40:1. It stands at 60:1 today.

Capitalist commentators tell us that the Third World is "developing". We are meant to believe that in the distant future, if the poor countries apply tough austerity budgets and attract enough overseas investment, they will catch up with the West. Nothing could be further from the truth.

Countries like Sierra Leone in Africa are slipping further and further behind. During the 1980s, the minimum wage in Sierra Leone fell by 80%. Since the economic crisis hit Asia, even the so-called miracle economies of South Korea and Indonesia have been contracting.

Today, 1 billion of the world's people live in absolute poverty, without enough food, clean water and shelter for basic survival. No matter how hard these people work, under the current economic system they will have to watch those around them die of malnutrition and poverty-induced diseases.

Cancelling the entire Third World debt would be a first step towards improving the lives of these people. Given the massive plundering of the poor countries by the West, this money was never owed in the first place. These debts are immoral, unjustifiable and unsustainable.

But the plight of the Third World will not be solved simply by cancelling the debt. What also needs to change is the structure of the world economy.

Current investment priorities mean that in 1992 the world spent $815 billion, equivalent to the income of 49% of the world's people, on the military. Just 7% of this amount would feed the entire African continent; 12% would provide the entire world with clean drinking water.

These investment decisions are made by the owners of giant companies like General Motors, BHP, Coca-Cola, Rio Tinto and Shell. To protect their profits, these capitalists back governments which make decisions in their interests. Governments in Washington, London, Bonn and Canberra spend a lot of money trying to crush popular movements which might threaten business profits.

The only alternative to the capitalist system is one that allows democratic planning and control of the world economy — socialism. The struggle for socialism is the struggle to redistribute wealth in the world and free the majority of the population from the hunger, poverty and injustice entrenched in the capitalist system.