Academic journal article Chicago Journal of International Law

Social Movements and the Politics of Debt Cancellation

Academic journal article Chicago Journal of International Law

Social Movements and the Politics of Debt Cancellation

Article excerpt

The question of sovereign debt restructuring has come up in the last three years, primarily in response to the plight of Argentina, which in 2001 was forced into the largest governmental default in recent decades. The Sovereign Debt Restructuring Mechanism ("SDRM") proposed by the International Monetary Fund ("IMF") in 2002, while failing to win approval from the institution's board, was a very narrow response to a narrowly defined aspect of the global debt crisis.

This article discusses the SDRM, but is more concerned with the larger scope of advocacy on debt issues by civil society movements over the last two decades. While it does take up legal strategies being used in those efforts, it is concerned with such tactics only in the context of the urgent calls for the elimination of the destructive cycle of debt afflicting most of the countries of the Global South. Its primary concern is to make the case that governments are obligated first and foremost to protect the interests of their citizens, and therefore should use the necessary political capital at their disposal to repudiate debt payments that handcuff their capacity to improve people's lives and inhibit democratic self-determination of countries' most salient policy decisions.

I. THE REALITIES OF DEBT

External debt, arcane and dry as the subject may sound, has been a focus for activist campaigns for more than twenty years. Debt has long been a grave concern for people in the Global South-Africa, Asia-Pacific, Latin America, and the Caribbean-because it is the reason given by their governments for adopting harsh austerity programs that curtail public services and restructure economies in harmful ways. For people in industrialized countries-the Global North-debt is an obvious entry point in understanding the global economy, since it is their governments and the international institutions that their governments control that are receiving the debt payments and imposing conditions on countries struggling with impossibly large debt burdens.

The global debt crisis has turned the logic of development assistance on its head. For every pound that wealthy countries provide as aid to impoverished countries, thirteen pounds flow back in debt service payments. Developing countries pay back well in excess of one hundred million dollars every day. Africa, the continent worst hit by the HIV/AIDS pandemic, spends four times more on debt payments than it does on health. Africa also pays about $13.5 billion in debt service annually, while experts have estimated that the amount needed to fight HIV/AIDS on the continent is between $10 and $15 billion per year.1 Despite the generous rhetoric officials often use about the HIV/AIDS crisis, or more recently about the devastation caused by the December tsunamis, there is no sign that this fundamental imbalance will be addressed.

If the loans the indebted countries are now paying off had worked as intended-that is, if they had led to sustainable development-it would make sense for the South to be paying more than it receives. But the grim truth is that for over twenty years, countries have been stuck in a cycle of taking out loans to pay off old debts. And every time they do so, their governments agree to a new set of harsh economic policies. Ostensibly designed to lift the country out of debt and poverty, the universal failure of these "structural adjustment programs" ("SAPs") since their widespread imposition in the early 1980s has exposed structural adjustment as a tool to integrate developing countries into the global economy, where they have played the role of providers of cheap commodities and labor.

A. THE PERPETUAL DEBT CRISIS

The problem of excessive external debt in Southern countries first came to global attention in the early 1980s, when the large Latin American economies-Mexico, Argentina, and Brazil-were on a course to default on their international obligations. At the time the greatest exposure, especially in Mexico, was on the part of large private banks in the United States such as Citibank and the Bank of America. …

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