[stop-imf] Assessing the G8 Debt Proposal & Its Implications - Part II

[Robert Weissman]

    http://www.50years.org/cms/updates/story/270


THIS IS PART TWO OF THE REPORT


    Sep 21, 2005

By Soren Ambrose
Solidarity Africa Network in Action (Nairobi, Kenya) & 50 Years Is
Enough: U.S. Network for Global Economic Justice (Washington, DC, USA)
August/September 2005


    PART TWO: WHAT DOES IT ALL MEAN? WHAT IS TO BE DONE?


      Responses from Debt Campaigners

Most of the responses to the G8 debt proposal from campaigners, with the
exception of the enthusiastic roars coming from Bob Geldof and Bono,
have characterized it as disappointing =96 or, to use Christian Aid=92s
formulation for the G8 summit as a whole, =93vastly disappointing.=94

Measured against what campaigners were demanding =96 in most cases 100%
multilateral debt cancellation for 62 countries without conditions =96 the
G8 proposal certainly did fall short. Any response would have to
highlight the amount left undone. Many reactions adopted an indignant,
even angry tone:

=95 Jubilee South: =93The multilateral debt cancellation being proposed is
still clearly tied to compliance with conditionalities which exacerbate
poverty, open our countries further for exploitation and plunder, and
perpetuate the domination of the South. [=85] Even if the debt
cancellation were without conditionalities, the proposal falls far too
short in terms of coverage and amounts to demonstrate a bold step
towards justice by any standard.=94

=95 George Monbiot, Guardian columnist: =93Anyone with a grasp of
development politics who had read and understood the ministers'
statement could see that the conditions it contains =96 enforced
liberalisation and privatisation -- are as onerous as the debts it
relieves.=94

=95 Demba Moussa Dembele, director of Forum for African Alternatives
(Senegal): =93At the moment this is nothing but a promise. [=85] Therefore
we will wait to see how this decision is put into action and with what
conditions. Caution is necessary also because the =91creditor=92 countries
are longtime masters of the arts of duplicity, manipuliation, and
concealment.=94

=95 Jayati Ghosh, coordinator of IDEAS (India): =93[E]ven otherwise
well-informed and progressive people in the developing world were fooled
into thinking that, for a change, the leaders of the core capitalist
countries were actually thinking about doing some good for people
desperately in need of it. [=85] The G-8 debt relief deal is actually a
paltry and niggardly reduction [=85]. And this pathetic amount is being
traded for yet more major concession made by the debtor countries, in
terms of sweeping and extensive privatisation of public services and
utilities, which is about all that is left for governments to sell in
these countries, as well as large increases in indirect taxes which fall
disproportionately on the poor.=94

=95 Oxfam (U.K.): =93Oxfam welcomed the Finance Ministers' agreement but
said it did not go far enough, only covering between 10 and 20 per cent
of what's required and not extending to all the countries that need it.=94

=95 John Hilary of War on Want (U.K.): =93The G8 has given less than 10% of
our demand on debt cancellation and not even a fifth of what we called
for on aid."

=95 Richard Bennett of Make Poverty History (U.K.): "A small minority of
the world's poorest countries will have significant debt cancellation if
this deal is agreed. This is a step forward, as we have publicly
acknowledged, but does not even come close to ending the debt crisis."

=95 Alex Wilks, coordinator of the European Network on Debt & Development
(EURODAD): =93In actual fact, the official plan may only write off 10% of
low-income country debt. Not a penny more. The G8 proposals are a step
forward, but will by no means resolve the developing country debt crisis.=
=94

=95 Collective statement of 19 major African NGOs, also endorsed by 9
international NGOs: =93The debt package provides only 10% of the relief
required and affects only one- third of the countries that need it. [=85]
both packages [debt and aid] are still attached to harmful policy
conditionality.=94

=95 The Committee for the Cancellation of Third World Debt (CADTM, based
in Belgium): =93The creditors' hold on those countries' [the 18 HIPC
graduates] economies is extremely strong, and the G8 ministers merely
proposed some debt relief and intended to reinforce conditionalities
linked to new loans.

=95 African Network & Forum on Debt & Development (AFRODAD, based in
Zimbabwe): =93The recent solutions offered by the G8 for the Debt crisis
in poor countries are nothing short of the continuation of the chains of
slavery and bondage for the citizens in those countries. [=85] they are
just raising people=92s hopes unnecessarily as the world waits to see the
devil in the details. [=85]The deal only represents one eighth of what
Africa needs in terms of debt cancellation, as this means canceling only
US $40 billion out of Africa=92s burgeoning debt stock of over US$330
billion. The agreement does not address the real global power imbalances
but rather reinforces global apartheid.=94

=95 John Pilger, syndicated columnist & film-maker: =93The truth is that th=
e
debt relief the G8 is offering is lethal. Its ruthless
=93conditionalities=94 of captive economies far outweigh any tenuous
benefit.=94 And elsewhere: =93it says that debt relief to poor countries
will be granted only if they are shown `adjusting their gross assistance
flows by the amount given=92: in other words, their aid will be reduced by
the same amount as the debt relief. So they gain nothing.=94

Many of these responses were directed nearly as much to the perceived
hyperbolic descriptions of the deal in the mainstream media, especially
in the U.K., the site of the G8 summit, and by U.K. officials like
Gordon Brown. Many of the columns, articles, and statements responding
to the debt proposal are motivated, often explicitly, by the concern
that many people will believe the campaign has completely succeeded, and
so there is no further need to pay attention to development issues.

The sensationalized treatment of the deal was, in part, a consequence of
the success of the Make Poverty History campaign in capturing media
attention in the weeks and months before the summit. Many in MPH
campaign would probably argue that its success was in fact taken too far
by the celebrity power of rock stars Bob Geldof and Bono, who were
treated as campaign spokespeople, despite the absence of any official
connection. Once debt, aid, and trade became identified with
celebrities, any hope of sophisticated analysis in the media was sacrificed=
.

Not everyone=92s experience of the news was like that of people in the
U.K., however. Those reading the opinions of debt campaigners or the
alternative/left press (right up to the Guardian and New Statesman in
the U.K.) certainly got a more sober viewpoint. In Kenya and other
African countries, it was virtually impossible to keep track of all the
opinion articles scorning the offer of debt cancellation, blaming poor
leadership for the continent=92s economic crises, and concluding that
Africans should not rely on charity from the North, for only Africans
can rescue Africa.


      Strategic Responses

It is, no doubt, good for activists pressing for an end to rampant
injustice to gauge developments against what should be, rather than
simply against what is perceived as practically possible. But is that
enough? Is it not necessary for activists to also engage in hard-headed
analysis informed by strategic and political realities?

Should we be judging our success, or the progress made on debt
cancellation, on the basis of whether the G8 leaders admit they=92ve been
wrong to design all their policies to benefit wealthy investors and
corporations, even when it means increased poverty? What are the real
chances that they would do anything of the sort, given that they have
never in the last 10 years, and probably much longer, said anything that
suggested an inclination to question the wisdom of the dominant
neo-liberal economic paradigm? The leaders=92 individual power, and the
power of their countries and corporations, is rooted in that system;
attaining an explicit rejection of it from the G8 is a long-term
aspiration at best.

The G8 is an exclusive, illegitimate club of the people running the
world, with no official legal status and thus accountable to no one.
With a varying degree of democratic constraints, these people control a
dominant portion of the world=92s money and military force. However much
success activists may have in building a =93movement,=94 we remain far from
being the sort of force that can determine the G8=92s positions. Whatever
lip service the G8 leaders may pay to activists=92 demands, their actions
are politically determined, and ordinarily prioritize the interests of
their most influential constituencies =96 the business sector and the
wealthy individuals who can fund political parties. Any time they depart
from those priorities, we should look at what political forces are
making that happen.

We should, then, look at the results of G8 summit not with the
expectation that we will secure all our demands, but always with an
expectation that the politicians will try to neutralize whatever noise
we=92ve been able to make, and then continue serving their usual
constituencies, though perhaps coating the news with some high-minded
rhetoric. Until we have assembled a much stronger global force =96 one
that has real political leverage -- we should not delude ourselves that
the G8 is going to become an ally.

We also must not fall into the trap of evaluating our work as debt
activists solely on the basis of what the G8 says or does. Advocacy
aimed at the G8 is just one of our tools. Our overall strategy must take
whatever comes out of the G8 and use it, if possible, to augment other
tactics. The momentum this G8 plan could give to repudiation campaigns,
for instance, is a major opportunity; recognizing that requires refusing
to take what the G8 says as the last word on what debt campaigners can do.

If the most serious analyses of the G8 proposal just explain how it
failed to meet the movement=92s demands, we are failing to look at what
has been gained and how, and we are failing to plot a strategy for
exploiting the new situation so as to attain more of those demands in
the near future. Yes, the critiques of the G8 deal are, in most
respects, correct; but it is at least as accurate to say that, even if
the promises are not kept, this is the biggest success debt campaigners
have had. It puts the G8 on the record as supporting the logic and need
for 100% elimination of multilateral debt, and as implicitly
acknowledging that the HIPC debt scheme has failed and, by extension,
that the impact of the corporate-globalized economy is unsustainable, at
least in some places. These are very valuable statements (or, in the
latter example, logical extrapolations). Yes, they apply to far too few
countries at the moment, but they will serve as the bulwark of ongoing
debt campaigns as we struggle to expand this victory.

And, if the pledges are kept, it will mean 100% multilateral debt
cancellation for 14 African countries, and substantial multilateral debt
cancellation for four Latin American countries (the exclusion of the
Inter-American Development Bank from the deal means it is less
impressive in Latin America). And that cancellation is, if the deal is
read literallyk, to take place without additional conditions. Dismissing
a development which might very well have considerable tangible benefits
for the most vulnerable people in these countries risks compromising our
credibility with them and other observers.

The promises of the G8 Finance Ministers=92 statement alone substantially
change the context faced by campaigners in Northern, and especially G8,
countries. Should they become reality, they will shift the field of play
for all campaigners. To downplay or ignore these facts in civil society
responses to the plan was not only inaccurate, but risks scuttling
entirely the campaigning momentum that had built up before the summit.

Activists should recognize that they have, after years of campaigning,
but still against the odds, had a real impact on the G8. We are, for the
moment at least, =93players=94 in global politics. The strategic response i=
s
to consider what actions we can take while we have this status in order
to expand our impact. Viewed this way, the G8 plan should be seen not as
business-as-usual, but an opportunity to continue acting =96 and not only
in terms of advocacy aimed at Northern institutions and governments. If
we act, we may be able to change things more; if we focus our efforts on
critiques, we take ourselves out of the game.


      An Empirical Gauge of the Impact of the G8 Plan

As outlined in the earlier analysis of the G8 statement, there are moves
afoot within both the IMF and World Bank to subvert the G8=92s plan.
Non-G8 European directors at the IMF are threatening to block the
program unless they are able to impose the same devastating conditions
they always have. At the World Bank, senior management is busily
misinterpreting the G8 statement and finding artful ways to re-institute
conditions.

These unusual maneuvers in both institutions are perhaps the best
evidence that the G8 statement really does signal a break with debt
policy as it has been practiced until now; it is a significant threat to
business-as-usual. The assumption by many commentators that the plan, as
outlined, really does include ongoing conditions is controverted by
these desperate attempts to re-attach the conditions.

These rear-guard measures may succeed, especially because some of the G8
countries =96 France, Japan and Germany in particular =96 were apparently
dragged along with the proposal despite serious reservations. What is
disconcerting is that the responses from civil society leaders, meant by
many to prevent demobilization of the activist community, may have the
paradoxical effect of discouraging those activists from acting to
preserve the gains represented in the G8 plan. Why should they fight for
a plan dismissed as negligible or a vehicle for re- imposing IMF
conditions? If this turns out to be our present reality, we will have
fallen into the trap of wallowing in our familiar state of going from
failure to failure, when a more active interpretation could have
energized our activists with a success and prodded them to active
engagement to preserve, and maybe improve or expand, the victory.


      The Meaning of the Deal for Most Southern Countries

In Kenya it became clear that even in a country that was excluded from
the deal, the results can be positive. A prominent cabinet member
denounced the G8 for excluding Kenya, not once but nearly daily for a
week, often on national television. Two members of Parliament advocated
repudiation or a suspension of payments. These developments, and a
recognition that the terms of this plan likely exclude the possibility
of one that will benefit Kenya in the near future, have caused Kenyan
campaigners to see an opening to argue for full repudiation. They are
now building a campaign around this demand of their government =96
arguably the strongest demand Southern campaigners can make. Instead of
asking leaders of rich countries to grant cancellation, they are
demanding genuine accountability from governments that are too often
accountable chiefly to their donors.

For campaigners in Southern countries, outside the 18 beneficiaries, the
most significant impact of this proposal may not be the precedent set by
the G8, but the impetus it gives to campaigns for more radical
solutions. In the final analysis, it is only when power relations are
transformed that debt and other economic justice campaigns can be
considered won, so moving closer to empowering citizens and governments
in the South is ultimately more important than deducing what more can be
achieved with the G8. This is not to trivialize the work of Northern
campaigners, who should keep pressuring their governments and the IFIs,
but rather an acknowledgement that liberation can only come from within
the countries being oppressed. Northern campaigners should be urging
their governments NOT to collect the debt.

In this regard, it is potentially significant that between the June 11th
announcement and the G8 summit, the African heads of state decided at a
meeting of the African Union in Sirte, Libya to call for comprehensive
debt cancellation for the entire continent =96 the first such unified
call. At least two presidents of benefiting countries, Abdoulaye Wade of
Senegal and John Kufuor of Ghana, responded to the deal by saying it
would only have real meaning in the context of continent-wide
cancellation. Activists now have the opportunity to use these statements
to pressure their governments to repudiate, or at least demand a much
better deal.

The example of Nigeria is fresh in people=92s minds: when the lower house
of the federal legislature called for repudiation of the entire external
debt, and President Olusegun Obasanjo demurred but said it may come to
that, the country=92s bilateral creditors instantly became significantly
more willing to make a deal at the Paris Club. The merits of the deal
Nigeria got in June 2005 are the subject of fierce debate, but the
important thing for campaigners is the successful deployment of a
credible threat of repudiation, which can be held up to other countries.
Another lesson from Nigeria may well concern the dangers of a top-down
campaign: since the pressure for repudiation came largely from
legislators, once they are satisfied with a deal, the pressure can
easily disappear. But one of the civil society campaigners, Justice
Egware of the Civil Society Action Coalition on Education for All in
Nigeria, drew the logical conclusion from the G8 Summit, saying, =93The
message from Gleneagles is clear to us in Africa. We will intensify our
call to our governments that have not secured debt cancellation to
strongly consider repudiating unjust and odious external debt.=94

Debt and economic justice campaigners in Africa and other parts of the
Global South have a network called Jubilee South, which has recently
opened an Africa secretariat in Kenya (with which the author is
associated). If the repudiation campaign takes off in Kenya, Jubilee
South will be well-positioned to encourage other campaigns to adopt the
strategy. A strong demand for repudiation from many countries could be
substantially more powerful than one restricted to a single country.


      Of Gratitude and Politics

Another concern of some of the critics of the G8 plan seems to be that
if campaigners do anything other than criticize it, they will be seen as
=93approving of,=94 =93grateful to,=94 or =93working with=94 the G8. This r=
eductive
view of political activism is unwarranted. Acknowledging the ways in
which the G8 debt plan is a victory in no way obligates us to express
gratitude to governments for taking actions that should never have been
necessary in the first place, nor to lose sight of the fact that the G8
and the IFIs remain very much the enemies of social and economic
justice. What such a viewpoint implies is simply that we activists are
achieving something =96 forcing the G8 and the IFIs to take steps most of
them do not want to take. That=92s politics.

If we appreciate the achievement of =93 beating=94 the G8 and the IFIs in
this case, this victory could be part of building serious momentum for
the global justice movement as it moves toward the WTO meetings in Hong
Kong and other key events. Unfortunately it appears that the G8 proposal
will be perceived by many progressive campaigners as another defeat,
albeit with some potentially positive aspects.

In a similar vein, many campaigners refused, in the year before the G8
summit in Scotland, to take the U.S. debt proposal to the G8 seriously,
on the grounds that the Bush Administration is deceptive, motivated only
by self-interest, and wantonly unilateralist. All true, of course, but
to extrapolate from those truths to viewing everything the U.S.
government says as simply a trap is to misunderstand politics and the
strategic openings it can provide. As criminal as many of the Bush
Administration=92s actions are, it must be acknowledged that it is the
most radical administration the U.S., and perhaps any G8 country, has
seen in modern times. It is willing to overturn precedents, disregard
international norms, and break with tradition. In most cases this has
been destructive, but when applied to a system as corrupt as the one
managed by the IMF, World Bank, and G8, it can generate opportunities.
Again, there is no reason to express solidarity with the Bush
Administration, but there is ample reason for activists to identify and
exploit the existing political openings, including the tensions among G8
governments.

European campaigners=92 dismissal of the U.S. proposal =96 which called for
100% multilateral cancellation, apparently unconditional, for 41
countries, using the resources of the IFIs =96 and their virtual
endorsement of the British proposal =96 which called for paying the debt
service for ten years of about 25 countries that met strict conditions,
using new donations from wealthy countries =96 could have given the G8 a
green light to adopt a plan like the U.K.=92s. Such a plan, which probably
would not have had U.S. participation, would have been far worse in
almost every respect than what was achieved. Yet the British government
was allowed to label it =93100% debt cancellation=94 =96 a transparently
dishonest claim =96 without organizations questioning them for several
months. This put several large mainstream organizations in the U.K. in
the uncomfortable position of having supported a proposal substantially
less progressive than what the G8 ultimately approved.

Fortunately, some British organizations began challenging the U.K.
proposal in the weeks just before the G8 Finance Ministers=92 meeting.
Also fortunate =96 though only in this one case =96 was the fact that the
U.S. wields the most power within the G8, and the Bush Administration
likes to use it. Just as any reasonable statement on climate change at
the summit was scuttled by the U.S., so the final result on debt ended
up looking more like the U.S. proposal than the U.K.=92s =96 despite the
insistence of campaigners in the U.K., France, and elsewhere that such a
result was impossible.

Another factor encouraging European groups to favor the U.K. proposal
was the =93additionality=94 question. This was a clear case of =93moving th=
e
goalposts=94 from the Jubilee demands: no longer was 100% unconditional
debt cancellation sufficient =96 the demand now was that benefiting
countries realize a net increase in revenue flows as a result of
cancellation. This position, adopted by most U.K. groups, largely
de-politicized debt. Instead of being about power relations, instead of
freedom from debt meaning policy sovereignty, everything came down to
adding up the numbers. Even John Pilger, a commentator known for seeing
the political meaning of economic decisions, fell into this trap in the
passage quoted above. That this position became conventional wisdom
throughout Europe (while hardly infecting North America at all), to the
extent that one of its advocates claimed that =93Jubilee 2000 was always
about increasing revenue flows,=94 and a draft position paper declared
that a deal for debt cancellation without additionality was =93worse than
no deal at all,=94 is nothing short of astonishing. The virus that
apparently swept across Europe made campaigning organizations the allies
of the World Bank and IMF in discounting the politics of economic
domination, and in some cases even had people prioritizing the
preservation of IMF and World Bank loans (and the domination, and new
debt, that goes with them) over the emancipation of countries from debt
and from the continuing devastation of structural adjustment imposed by
outsiders using the weapon of debt.

Debt is a political instrument, one that traps countries in the snare of
conditions and never lets go, subjecting millions to national policies
that must please corporate interests before addressing their own. It=92s
uncertain whether this new deal from the G8 will actually liberate
countries from that insidious arrangement, but there can be no doubt
that it will do more to move them toward liberation than new aid money
will (especially if it comes from the World Bank or IMF!). Even for
those who prefer to live in a political vacuum, it is widely agreed that
debt cancellation is the most effective way to mobilize funds for
developing countries.


      =93Financing=94

Many Northern groups found themselves lobbying their governments not on
the provisions of the final debt program, but rather on how it would be
=93financed.=94 This is another manifestation of the logic of
=93additionality=94: campaigners taking on the assumption that it is
important to preserve the financial health of the World Bank and IMF, so
that they can continue to make loans for destructive projects and in
support of devastating economic conditions.

When it appeared that the plan might die altogether because of
disagreements over how to compensate the institutions for the payments
they would no longer be able to count on, even those opposed to
discussing financing could not argue against the strategic logic of
promoting financing plans. But now that the G8 plan has been formalized,
the institutions and even some campaign organizations are expressing
concerns that the financing mechanisms are not substantial enough.

We should resist playing into the IMF and World Bank=92s hands by
attaching any legitimacy to their ostensible concerns regarding
financing. The G8 took the unusual step of =93committing=94 to the debt
cancellation, and (alas) to compensating the IFIs. If we are serious
about our position that the debts are illegitimate, and if we accept
that nothing is more important for development than debt cancellation,
then we should say that taking the most effective step for the
development of the most impoverished countries should take priority over
any other development agenda. The IMF and World Bank have billions of
dollars at their disposal; they have no excuse for not canceling the
debts that have paralyzed whole continents. These institutions know that
private banks regularly write off bad loans, which means that they have
to figure out how to do without the previously-anticipated income. The
IFIs can do the same. Engaging in coming up with ways to find the funds
to balance those institutions=92 books should be distasteful to us,
especially if we believe that a financially healthy IMF and World Bank
are greater dangers than a few unemployed economists in Washington, DC.


      The Policy Support Instrument

The ominous undercurrent during all the discussions leading up to the G8
plan has been the suggestion that the IMF should create a new =93facility=
=94
that would allow it to continue imposing conditions on countries even
when it is lending no money. This looks very much like a way to ensure
continued IMF domination of countries even after they have their debt to
the IMF cancelled, or after they take a sovereign decision to avoid the
IMF. Getting a =93 pass=94 from such a facility could become a condition of
getting any other assistance, investment, or trade deal.

Now the IMF is going public with the plan, called the Policy Support
Instrument (PSI). Its test case is Nigeria, in conjunction with its
Paris Club deal: to reassure the Paris Club, which normally requires a
country to be under and IMF plan to negotiate with it, Nigeria will be
formally =93monitored=94 by the IMF despite taking no loans from the
institution.

The PSI has the potential of mitigating or eliminating the political
benefits of debt cancellation. As it is considered by the IMF board,
campaigners will need to organize serious pressure to prevent its
approval, or at least to limit its scope.


      The Final Word

Economic justice won an incomplete but real victory on June 11th. Let=92s
work to extend it rather than find ways to pronounce it a defeat.

* The Finance Ministers=92 statement, rather than the G8 summit
communiqu=E9, is the authoritative document. The summit communiqu=E9=92s
reference to debt reads: =93The G8 has agreed a proposal to cancel 100% of
outstanding debts of eligible Heavily Indebted Poor Countries to the
IMF, IDA, and African Development Fund, and to provide additional
resources to ensure that the financing capacity of the IFIs is not
reduced, as set out in the statement of 11 June.=94 (point 29, page 27, =93
Africa=94 section)