Some lucid analysis from Noam Chomsky...
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To: "[log in to unmask]" <[log in to unmask]>
From: Rotheram Steven <[log in to unmask]>
Date: Fri, 19 May 2000 12:54:34 +0100
Subject: [mayday2000] Third world debt
Hello Folks,
I received this from a friend, again. I thought I would pass it on.
Regards,
Steven.
In Noam Chomsky's forum he was recently asked:
"What do you say to the argument that the countries who borrowed from the
WB/IMF have no right to ask for debt forgiveness (nor should anyone ask on
their behalf) and should be held responsible for their debts like you or
anyone else would? ... And to what extent is the first world responsible for
the debt crisis? ... I guess in a nutshell I would like to better understand
where the culpability of my own gov't lies (US), and where that stops and
the culpability of third world govts starts."
His answer, of course also in the forum, is so germane to and clear about
one of the key issues of global economic relations, that I thought I would
send it along in this Update. (To learn how to ask him your own questions
and get answers, and do likewise with Ehrenreich, Zinn, myself,
Cagan,Weissman, Shalom, Peters, Wise, and other ZNet writers...please visit
www.zmag.org/commentaries/donorform.htm and read about the program.
Reply from NC
The simplest answer to the argument that countries who borrowed from the
WB/IMF have no right to ask for debt forgiveness is that the presupposition
is false, so the argument is vacuous. E.g., the "country" of Indonesia
didn't borrow; it's US-backed rulers did. The debt, which is huge, is held
by about 200 people (probably less), the dictator's family and their
cronies. So those people have no right to ask for debt forgiveness -- and in
fact, don't have to. Their wealth (much of it in Western banks) probably
suffices to cover the debt, and more.
Of course, this response assumes the capitalist principle. According to this
principle, if I borrow money from you, use it to by a Mercedes and a
mansion, and send most of the money to a bank in Zurich, and then you come
and ask me to repay the loan, I'm not supposed to be able to say: "Sorry, I
don't want to pay you back, take it from the folks in the downtown slums."
And you're not supposed to say: "I got the high yields from this risky
investment, but now that the borrower doesn't want to pay it back, the risk
should be transferred to other folks in my country through socialization of
the debt. That's the capitalist principle. It would suffice to largely
eliminate the debt. Of course, that principle is unacceptable to the rich
and powerful, who prefer the operative "capitalist" principle of socializing
risk and cost. So the risk is shifted to northern taxpayers (via the IMF)
and the costs are transferred to poor peasants in Indonesia, who never
borrowed the money.
The argument that "their country" borrowed the money so that they are
responsible surpasses cynicism, and need not be considered.
In fact, it doesn't even stand up under international law. When the US
conquered Cuba in 1898 to prevent it from liberating itself from Spain (what
is called "the liberation of Cuba from Spanish rule"), it cancelled Cuba's
debt to Spain on the reasonable grounds that the debt had been forced on the
people of Cuba without their consent. That doctrine, called "odious debt,"
was later upheld in international arbitrarion, with US initiative. The
current US executive-director at the IMF, international economist Karen
Lissakers, pointed out in a book a few years ago that if this principle were
applied to third world debt, it would mostly disappear. But that would mean
that the capitalist principle would have to be observed: borrowers have the
responsibility, lenders take the risk. And that plainly won't do, when the
concentration of power makes it possible to socialize cost and risk.
On first-world responsibility for the debt crisis, it is huge -- and in this
case, the responsibility extends to citizens, insofar as their countries
make possible some degree of participation in policy formation, and they do.
The current debt crisis can be traced back to policies of the IMF and World
Bank encouraging lending/borrowing to recycle petrodollars in the 1970s.
Their very confident recommendations that this was just great for all
concerned continued up to the moment of the Mexican default in 1982, when
the system threatened to crash, and the same institutions stepped in to
socialize cost and debt. Another factor was the sharp rise in interest rates
in the US under the late-Carter/Reaganite policies of a form of "structural
adjustment" here, undertaken with no concern, of course, for the fact that
this would impose a crushing burden on third world debtors, as it did.
Another factor, of course, is Western support for the murderers, gangsters,
and robbers who borrowed the money for themselves and, naturally, don't want
to pay it back, when they can get the burden shifted to the poor by the same
institutions that created the debt in the first place.
First world responsibility is enormous, so much so that if honesty were
conceivable, those who supported folks like Suharto in Indonesia, drove the
lending-borrowing craze (then bailing out the banks), and sharply increased
interest rates as part of the further shift of power to the rich and
privileged in the US (and that's not all), should be paying the debt
themselves.
The culpability of third world governments -- say, Suharto in Indonesia --
is enormous, but remember that these governments are western
clients,outposts virtually, whose task is to open their countries to foreign
plunder, repress the population (by huge massacres if necessary), and enrich
themselves if they feel like it (that's not a responsibility, just an
incidental benefit accorded them). Suharto was "our kind of guy," as the
Clinton administration put it, as long as he fulfilled this role. Much the
same hold for other third world governments. Those that try to follow
another course typically get smashed. E.g., Nicaragua has one of the highest
debts in the world. The Sandinistas were doubtless corrupt, though not by
preferred US standards, but that's not the reason for the debt: rather, the
fact that the US waged a brutal and murderous war to get them back into
line.
Note again that culpability of our governments (and their institutions, like
the IMF-WB) are also our culpability, to the extent that we have the
capacity to influence policy, and don't.
Noam Chomsky
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