BY EVA CHENG
What does it say about the nature of the current world order when, despite expanded food production capacity and sophisticated life-saving technologies, more than 30,000 children under five still die each day in Third World countries from hunger and poverty-related diseases?
What does it say when, despite the leaps and bounds in the development of productive capacity, the per capita income of more than 100 countries has contracted in the last 15 years? How is it that the per capita consumption of the already impoverished people of Africa plunged 20% in the last 20 years?
Much of the blame rests on the Third World's crushing US$2060 billion foreign debt which, in 1998, equalled 43% of the total economic output of all Third World countries and 99.5% of that of the least developed countries.
The repayment burden on this debt is crushing, soaking up nearly $200 billion a year and pushing aside essential social spending. African governments, for example, are transferring to international creditors four times what they spend on basic health and education.
Some Western commentators have blamed the Third World for this burden, accusing it of overborrowing. And some countries certainly did borrow heavily — in 1982, at the time its debt crisis first hit, Mexico owed money to more than 500 foreign banks.
Overborrowing?
But the more important issue — why Western banks were willing to lend such vast sums in the first place — is generally ignored.
During the 1970s, the major international banks pushed loans, with dirt-cheap rates of interest, onto the Third World, in an attempt to overcome "excess liquidity".
The banks were suffering from a rising amount of money-capital (in part, from the "petrodollars" invested in them after the oil price hikes of 1973-74) and declining opportunities for an adequately profitable outlet. They needed that money to go somewhere.
Desperate to expand away from traditional sources of demand, Western corporations also prompted banks, governments and multilateral institutions like the World Bank and International Monetary Fund to ease credit to Third World governments so those governments could buy these corporations' products.
Cheap credit caused an explosion of Third World borrowings, from US$70 billion in 1970 to US$560 billion in 1980.
Much of this lending went straight to corrupt Third World officials. A 1993 study estimated that as much as 80% of Third World external borrowing never even reached the target country.
The lending party, or its government, was often not innocent. A University of Gottingen study named Belgium and France as the top two countries most active in offering overseas bribes which, formally called "business commissions", are often tax deductible.
In 1979, however, the US Federal Reserve, in a deliberate attempt to drive down domestic inflation, jacked up interest rates (to 28% in 1982), pulling world interest rates along with them.
Even then, though, with Third World governments' interest bills ballooning and the risk of default rising, Western bankers remained desperate to dish out loans.
Rather than negotiating debt cancellation or relief, debts were simply "restructured": new, shorter-term and more expensive loans were piled onto the old ones, sinking Third World borrowers deeper.
During the 1990s, the Third World's borrowings increased from US$596 billion in 1982 to US$1419 billion in 1992.
Economies crippled
But while the Third World's liabilities were fast rising, its ability to repay was worsening.
Many countries' economies were crippled during colonialism, when they were restructured to serve the colonial powers, and as a result most lacked the foreign currency earnings with which to pay for essential imports.
Their foreign revenue came, in most cases, from the exports of a handful of cash crops, energy and other natural resources. The price of these primary commodities has been in long-term decline against those of the finished manufactures sold to them by Western countries.
When the IMF and the World Bank stepped in during the 1980s and devised "structural adjustment" programs to ensure repayment, Third World governments were ordered to concentrate even more on these few exports, increasing competition between exporter countries and forcing prices down further.
Even those Third World countries which later took up low value-added manufacturing exports to generate extra earnings have found that their total hard currency income was hardly enough to meet their import bill.
The constant decline in the poor countries' terms of trade has been a crushing blow — in no small part due to the price manipulations of their prime customers, the big transnational corporations which dominate all the key economic sectors.
For example, Latin America's export volume rose by 7% in 1998, but its export income declined by 2%. Mineral exports, which many poor countries rely heavily upon, suffered a 31% drop in price in the nine years to 1998, even while their volume rose 52%.
The terms of trade of the 48 least developed countries fell by 12% on average between 1988 and 1993, recovered by 6.0% in 1994-97 and then declined sharply, by 28.5% and 23.2%, in 1998 and 1999, according to the UN's Least Developed Countries Report, 2000.
Translated into dollar terms, the decline of their terms of trade cost 15 severely indebted middle-income countries US$247.3 billion in the nine years to 1989, and sub-Saharan Africa a back-breaking US$56 billion in the four years to 1989.
Fake 'relief'
The First World has done pathetically little to ease the burden on the poor debtor countries. The much-trumpeted debt relief program for 41 highly indebted countries, administered by the World Bank and IMF and launched in 1996, has not offered real relief, but rather only made Third World countries' existence more precarious.
Before they are granted limited debt reduction, potential candidates have to prove their adherence to a six-year job-destroying and deflationary austerity program, grotesquely called a "Poverty Reduction Strategy Paper", which is similar to a typical IMF "structural adjustment" program.
As of July, the debt reduction amounted to a pathetic US$2.5 billion, equivalent to 1.2% of these countries' foreign borrowings or 0.12% of the Third World's total external debt.
Even after debt relief, the 22 countries who have so far qualified for the scheme will still spend more on debt servicing than on health care. Some countries, including Zambia and Niger, will actually be paying more in servicing after debt relief than before it.
Nor has overseas development assistance been any help. Western countries often require a recipient country to buy a donor country's products, privatise public entities or cut social spending as conditions for aid. Such aid is also shrinking: from US$45 billion in 1992 to US$34 billion in 1998, or from US$11.1 per capita to US$7.5.
Third World debt is a product of, and helps perpetuate, the unjust world order under which a handful of imperialist countries headed by the US dominate the rest economically, politically and, if needed, militarily. This subjugating hierarchy, an integral part of capitalism, helps tame the system's inherent contradiction of overcapacity and capital overaccumulation — but at very high human costs.
This shameful venture must end; the bloodsucking must stop.
An urgent first step is to cancel all the Third World's debt, which will give breathing space to many long-suffering countries. But, to be of real long-term help, such a cancellation must be followed by significant steps to dismantle imperialist domination of the world economy.