Debt and austerity: from the global south to Europe

21 May 2011 by Andy Storey


Between 6 and 8 May hundreds of campaigners against debt and austerity gathered in Athens to exchange ideas and information on everything from the experience of default to the structure of debt audits. Andy Storey was there, and reports that delegates came away from the even determined to build a truly global movement for economic justice.

The gathering in Athens on 6-8 May of hundreds of campaigners against debt and austerity was a remarkable event. From sessions on the terrifying reality of austerity in Greece and elsewhere, to the lessons to be learned from the Global South, to the strategies of resistance that can be formulated, a vast range of issues was discussed.

One of the key themes was that Europeans do not need to reinvent the wheel: other parts of the world have been here before and can advise us what to do. For example, Maria Lucia Fattorelli from Brazil warned of the ‘lost decades’ endured by Latin America under structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/
– at the end of which the debt owed had still increased. Lidy Nacpil from the Philippines made the same point, with particular reference to the devastating impact of mass emigration on the family and social relationships in her country. Peruvian economist Oscar Ugarteche stressed that things could actually be worse for Europe because most Latin American countries had low debt-GDP GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
ratios when the crisis began there, whereas Greece and other European countries already have high debt levels relative to their economies.

As English debt campaigner Nick Dearden put it, the speakers from the Global South were urging Europeans to ‘stand on their shoulders’ and to fight back early. There will be an interesting psychological hurdle for some Europeans to overcome here: when people from the so-called ‘Third World’ are saying ‘fight, and we will advise and help you’, can we break free from our ingrained tendency to see ‘us’ as the ‘advisers’ and ‘helpers’ of ‘them’? If we can’t, then we should just give up; as Nick explains, ‘If we are unable to confront injustice on our own doorstep, there is little point in pretending we can confront it half a world away.’

And one of the ways to confront it is through debt audits, a subject I have written about here before. Sofia Sakorafa, a Greek MP who resigned from the ruling PASOK party over its support for the ‘bail out’, and who opened the conference, said ‘the answer to tyranny, oppression, violence and abuse is knowledge’, and debt audits are pathways to knowledge. One of the most rewarding sessions for me at the conference was a workshop with Maria Lucia (a veteran of debt audits in Brazil and Ecuador) and Lidy as they explained the practical nuts and bolts of auditing debt – what works, what doesn’t, what traps you can fall into and how to avoid them. The first practical steps towards a Greek debt audit started the following weekend when progressive lawyers and economists came together to decide what needed to be done and to divvy up the labour. And the Irish debt audit team is now in place (based at the University of Limerick) and is working away on the figures here. Spanish delegates expressed determination to start an audit there as soon as possible. We need to ensure that these are integrated pan-European initiatives, querying debt legitimacy in its entirety rather than one debtor country making a solo run for more favourable treatment (which is basically the position of the Irish government).

The dangers of European citizens being divided against each other were also apparent at the conference. Andrej Hunko, a German Die Linke MP, spoke eloquently about the way in which the German media has stirred up popular hostility against ‘lazy’ Greeks and expressed his solidarity with Greek resistance to the bogus ‘bail out’. Nonetheless, some of the Greek people asking questions and making comments following his talk could barely conceal their hostility to any German input, a hostility based not only on recent events but also on traumatic memories of wartime occupation and resource theft. The chairperson of the session had to remind attendees that Andrej was not personally responsible for the Nazi plunder of Greek gold or the terms of the ‘bail out’!

But if the potential for division is resisted, then victory is possible, another lesson that the Global South delegates emphasised. Alan Cibils, an economist from Argentina, demonstrated that Argentina only brought an end to its economic catastrophe when it defaulted on its debt (a lesson that a recent series of articles in the Irish Times seemed determined to ignore). Maria Lucia documented how Ecuador’s debt cancellation flowed directly into increased social spending. So there was hope, as well as anger and contention, at the gathering. Follow-up actions are being planned – putting in place structures for information sharing and others – and we are determined to build a truly global movement for economic justice, to insist on the principle expounded by Maria Lucia Fattorelli that ‘not everything in this world is for sale, not everything has a price’.

Source : Politico




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