Magazine article New Internationalist

FIGHT DEBT: All Together Now!

Magazine article New Internationalist

FIGHT DEBT: All Together Now!

Article excerpt

As public outrage flares over bank bailouts and Europe reels under austerity, it is worth bearing in mind another catastrophe. That one began 30 years ago and sacrificed the lives and livelihoods of tens of millions of people in the name of debt.

The 'Third World' debt crisis is one of the most important global 'events' of the postwar period and is essential to explaining the corporate-run world economy we have today, its unprecedented levels of inequality and the malaise now gripping the global North.

How debt destroyed the 'Third World'

In 1982, Mexico, one of the world's biggest debtors, went into default, sending shock waves through the financial system and triggering fears of similar collapses.

Latin America's debt had built up during the 1970s as US and European banks lent huge sums to both private and public sectors. This lending was a way of selling US and European goods and of restructuring the global economy around the dollar.

When the US hiked interest rates in the early 1980s, the debt trap was sprung. Mexico was the first to teeter on the brink of bankruptcy.

The country owed over $50 billion, mostly to Northern banks, and to prevent all-out default, the International Monetary Fund (IMF) stepped in with a $4 billion 'bailout' loan to pay the foreign creditors. At the same time, the IMF insisted Mexico introduce radical austerity and liberalization. Their policy prescriptions - open markets, free flow of money, 'the private sector knows best' - were imposed through the power of debt.

Mexico's economy collapsed and stagnated. The same story was repeated across Latin America as the IMF's 'Structural Adjustment' edicts were put into action. By 1990 Latin American economies were on average eight per cent smaller than they had been in 1980, and the number of people living in poverty increased from 144 million to 211 million. Government foreign debt across Latin America more than doubled.

Dozens of nations had their sovereignty undermined and the power of the Non- Aligned Movement of Southern countries not affiliated to the US or Soviet Union was sapped. Washington now directed their economic policy. Globalization was born.

The crisis didn't stop at the shores of Latin America - Africa was also burdened by debt, thanks to US and European governments trying to buy offdictatorial regimes during the Cold War and create markets. By the end of the 1980s, the debt crisis had created a global humanitarian catastrophe. Social spending was cut to the bone and development - both economic and human - went into reverse. The effects were to be long-lasting.

Take the case of Jamaica - a country that became synonymous with Structural Adjustment. In 1990, 97 per cent of children completed primary school. Today only 73 per cent do. In 1990, 59 mothers died in childbirth for every 100,000 children born. Now it is 110.

Jamaica is just one of dozens of countries where people were forcibly impoverished so that their government could keep repaying evermounting debts.

Struggle for sovereignty

Starting in Brazil and the Philippines, and quickly spreading, activists challenged the impact of the debt crisis on their societies, often as part of the struggle against authoritarian rule.

In the North too, activists began to wake up to the 'Third World' debt crisis. Their call to 'drop the debt' haunted world leaders as activists pursued those organizations which ruled the global economy - the G8, IMF, World Bank and World Trade Organization.

Jubilee 2000 was set up in Britain in the late 1990s. Taking its name from an ancient Hebrew call for regular peasant debt cancellations, Jubilee built a broad coalition for debt cancellation. But many people heard this as a call for charity; that some countries had got themselves into a mess, were very poor, and so their debts needed to be 'forgiven'.

To many campaigners in the South, that portrayal was an insult. The simple 'antipoverty' story failed to explain how the debt had been run up and ignored the responsibility of Western nations and their banks. …

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