“The borrower is servant to the lender.”
~ The Bible, Poverbs 22:7
We’ve talked often at BNV about debt in its many forms – both personal and governmental. The fact that most nations have debt obligations is not news. The U.S.’ debt to China has been a point of political contention that continues to stoke the flames of partisanship and incite fervent Congressional battles. Other large industrialised nations are not immune to heated debt-related battles; many of Europe’s citizens have staged protests to push back against austerity measures proposed and enacted by their government officials.
The battles over who and which segments of society should carry national debt leads to an interesting observation on a nation-by-nation basis: the sources of debt differ greatly around the globe. In the U.S. it could be said that years of trade imbalances, political posturing, ill-timed tax cuts and an upperclass that doesn’t pay its comparatively fair share of income taxes have led us down debt burden road — but what about the debts carried by our global neighbours?
“Debt, n. An ingenious substitute for the chain and whip of the slavedriver.”
~ Ambrose Bierce
Debt — especially if one is examining the burdens carried by developing nations (I loathe the term “Third World“) points to another adage: “When America sneezes, the rest of the world catches a cold.” Some may say the debt other nations incur is the negative price paid for the spread of democracy and the open financial system that supports it: capitalism. Others may put a more positive spin on things by saying that it means that divisions between nations are becoming smaller as we’re more connected than ever — and one way in which we’re connected is through debt. However, there is a different spin to consider: vestiges of colonialism.
Unlike the U.S., many of these countries face financial challenges that have been handed down through their history. For example, our West Indian neighbhours to the southeast, i.e., the Caribbean islands, are burdened with debt that many view as nothing more than an extension of colonialism. Take Haiti; in one form or another, this nation has been repaying France for its freedom over 200 years ago when France demanded, under threat of warships, a price for the value of the slaves and the colonised land. The billions of dollars (think about what billions means now and what it meant then!) at exorbitant interest rates have contributed to stifled growth for two centuries. Though some of Haiti’s debt was cancelled by the International Monetary Fund (IMF) in 2010 after devastating earthquakes, new reconstruction loans are in its place.
Other nations may fare only somewhat better than Haiti; large, industrialised nations have benefitted in the form of “loans” to developing nations. The monies have been in the form of obligations to dictatorial governments and (re)allocation of their natural resources; this extends colonial rule in that those nations often do not control what is theirs
In this video clip, John Perkins describes his role in “Confessions of an Economic Hit Man“:
Though this clip is half a decade old, it is disheartening to note that not much has changed, particularly with the policies of the World Bank and the IMF in place. The IMF today describes itself as “an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty.” The IMF states that its goals include promoting international economic cooperation, employment, and exchange rate stability, and making resources available to member countries to meet their debt obligations to other nations. True to form for the banking industry -and the IMF does serve as a banker — customers who can least afford the terms (and the least amount of power) are charged accordingly and have stringent repayment conditions attached to their loans. The debts pile up, often with no other means to ‘get out from under’ in sight.
According to Anup Shah on GlobalIssues.org,
“Third world debt has long been recognized as a major obstacle to human development. Many other problems have arisen because of the enormous debt that third world countries owe to rich countries. Debt has impeded sustainable human development, security and political or economic stability.”
Ongoing criticism of the IMF suggests that it functions as a cartel, and that only large nations and the IMF itself tend to benefit from the loans given to developing nations. Loan conditions have included Structural Adjustment Programs that were supposed to correct financial imbalances but, instead, resulted in privatisation of public services such as water utilities, and removal of subsidies for education, health care and food. These circumstances present a prime opportunity for outside influences to take over financially weak nations’ resources. Former President Bill Clinton said during a speech at the United Nations on World Food day, October 16, 2008:
“We need the World Bank, the IMF, all the big foundations, and all the governments to admit that, for 30 years, we all blew it, including me when I was president. We were wrong to believe that food was like some other product in international trade, and we all have to go back to a more responsible and sustainable form of agriculture.”
IMF lending terms and conditions often force countries to concentrate on generating hard currency to repay their loans at the expense of their most impoverished citizens. Isn’t that how human promise is stifled and nations kept under colonial rule? In order to resolve these problems, large wealthy nations must ask how much longer is the weight of economic uncertainty to be carried disproportionately by those who are most in need of help. After all, those of us who record history will be asking those nations whether keeping an already burdensome weight on the backs of those who can least afford it means that, for the wealthy and powerful, old habits die hard…if ever.
Greed is not good.
Image: renjith krishnan / FreeDigitalPhotos.net