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G8: The way to hell is paved with good intentions
by Eric Toussaint , Damien Millet
4 July 2005

On June 7, 2005, following a meeting with British Prime Minister Tony Blair, George W. Bush declared: “Our countries are working on a proposal which will eliminate 100% of the debt of the most impoverished countries”. Four days later in London, the ministers of finance of the G8 countries announced an agreement described as historic: the cancellation of the debt owed by 18 poor countries to the World Bank, the African Development Bank (ADB) and the International Monetary Fund (IMF) - a debt of some 40 billion dollars. Eventually, 20 other countries could become beneficiaries, bringing the total to 55 billion dollars. The Gleneagles G8 summit from July 6 to 8 and the annual Assembly in September of the IMF and the World Bank, which have not yet made their own views known, are expected to confirm this announcement. But the hidden side of this promise has transformed an apparent fairy tale into a genuine tragedy.

This is because announcements of this kind have been made before, and each time, the failure has been dismal in terms of human development. For example the Heavily Indebted Poor Countries (HIPC) initiative, launched in 1996 and reinforced in 1999, was supposed, according to the World Bank and the IMF, to enable the 42 countries concerned to meet “all their present and future obligations in external debt servicing without debt rescheduling or accumulating arrears and without weakening their economic growth”. To achieve this, it planned to enforce neo-liberal economic reforms along exactly the same lines as the structural adjustment programmes which since 1980 have inflicted great hardship on the people of the South: increases in school fees, health-care costs and VAT, removal of subsidies for basic products - four measures which affect the poor in particular; privatisations, trade liberalisation and the creation of unfair competition between local producers and transnational corporations. This generally leads to serious deterioration in the living conditions of the majority of the population and to a form of re-colonisation. In reality, major decisions are now taken in Washington (headquarters of the World Bank and the IMF) and at the Paris Club.

Once the plan reached completion, it was intended that a country’s debt would be sufficiently reduced to allow that country to resume regular repayments. The meagre funds made available were supposed to finance some social costs with a view to reducing poverty, thus seeming to respond to protesters’ demands but without calling into question the logic that led to over-indebtedness and abject poverty. The announcement of the reinforcement of the HIPC initiative in June1999 was as triumphant as the announcement of June 2005: 100 billion dollars of debt were to be cancelled, and poverty was to be drastically reduced. In short, it was historic.

Today the situation is disastrous: less than half of the Heavily Indebted Poor Countries have completed the process that should have been concluded at the end of 2004 but which had to be extended to avoid a fiasco. The bombastic announcements deflated like an old balloon: not only was there no sign of the 100 billion dollars, but between 1999 and 2003, the external public debt of the 18 countries concerned by the London announcement - precisely the ones that had completed the terms of the HIPC initiative - rose from 68 to 73 billion dollars. [1]

40 billion dollars out of 73 do not make 100%... Should we not be pushing for an alternative solution rather than the repetition of a clear-cut imposture? Far from solving the debt problem, the London announcement is, more than anything else, proof of the failure of the HIPC initiative: why, otherwise, would the debt of these 18 countries need to undergo a further reduction?

In reality, under the pressure of public opinion and international solidarity organisations, the G8 leaders are once again making a false concession. The HIPC initiative, which was portrayed as a major step forward, did not erase the debt of these poorest countries. Worse still, because of the conditions involved, it reinforced their dependence with regard to the outside world, increased social inequalities, and seriously affected the quality of public services.

The reaction of the world’s financial leaders to the tsunami of December 2004 is another example of false generosity: the decision to offer a moratorium on the debt of Indonesia and Sri Lanka was presented as the acknowledgement of “the exceptional magnitude and devastating effects of this disaster”, but this moratorium is in fact liable to late payment penalty interest and these countries will finally be repaying more than if the tsunami had not occurred. The way to hell is paved with good intentions, as the saying goes.

The cancellation of a part of the debt of the 18 countries (representing only 5% of the population of 165 developing countries) is anything but a gift: it is a small compensation for the neo-liberal straitjacket that they have been forced into for many long years. These 18 countries, with the connivance of their leaders, are under creditor control: the noose of debt - the tool of their domination - can therefore be loosened slightly.

But the annual amounts to be released are derisive compared with the scale of needs. Initial projections indicate that the 18 countries will save some 1 billion dollars per annum, which could be deducted from the aid they will receive if they fail to meet the docility criteria imposed by the rich countries reimbursing on their behalf. In fact, what is needed is not a pathetically meagre and hypothetical billion dollars. The United Nations Development Program (UNDP) has estimated at 80 billion dollars per annum the sum required to guarantee - over ten years - universal access to clean water, decent nourishment, primary education and basic health care. Finding this sum is a matter of political good will: each year, the G8 countries devote 700 billion dollars to military expenditure and 350 billion dollars to agricultural subsidies that dramatically penalise small Third World producers [2]. Just two months away from a UN summit focussing on delays in meeting the Millennium Development Goals, the G8 - a body without legitimacy - is “generously” offering a homeopathic dose of cancellation combined with continued application of neo-liberal shock treatment.

The relentless machine that creates debt and poverty is still in full operation; the G8 protects it by diverting attention through deceitful superlatives. We call for a radical change of logic: total and unconditional cancellation of the debt of developing countries, and development financing in line with real social needs through a massive redistribution of wealth on the planet.

Damien Millet is a professor of mathematics, President of The Committee for the Cancellation of Third World Debt (CADTM)-France. Eric Toussaint is a historian and political scientist, President of CADTM-Belgium. He is the author of Your Money or Your Life. The Tyranny of Global Finance, Haymarket, Chicago, 2005. Damien Millet and Eric Toussaint are co-authors of The Debt Scam, Vak, Mumbai, 2003 and Who Owes Who?, Zed Books, London, 2004.

Translated by Ngozi ONU and Judith HARRIS.

Footnotes :

[1Authors’ calculation based on World Bank Global Development Finance 2005.

[2In 2004 alone, all the developing countries combined reimbursed the astronomical sum of 374 billion dollars (source: World Bank, Global Development Finance 2005).

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Greece 2015: there was an alternative. London: Resistance Books / IIRE / CADTM, 2020 , Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012, etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

Damien Millet

professeur de mathématiques en classes préparatoires scientifiques à Orléans, porte-parole du CADTM France (Comité pour l’Annulation de la Dette du Tiers Monde), auteur de L’Afrique sans dette (CADTM-Syllepse, 2005), co-auteur avec Frédéric Chauvreau des bandes dessinées Dette odieuse (CADTM-Syllepse, 2006) et Le système Dette (CADTM-Syllepse, 2009), co-auteur avec Eric Toussaint du livre Les tsunamis de la dette (CADTM-Syllepse, 2005), co-auteur avec François Mauger de La Jamaïque dans l’étau du FMI (L’esprit frappeur, 2004).