Jun 20, 2005
Economic ministers of the seven richest countries in the world announced on June 13 that they would cancel 40 billion dollars of debts owed by 18 poor countries. The British and French ministers called this "historic agreement" a big step down the road in fighting world poverty.
This 40 billion is, however, a drop in the ocean of debt of the poorest countries. They owe 450 billion dollars to international agencies; they owe another 500 billion to the rich countries. And the largest part of their debt – more than one and a half TRILLION dollars – is owed to banks. The banks have no intention of reducing what the poor countries pay them.
This agreement is part of a discussion begun in 1996 to renegotiate part of the debt owed by countries "on the path of development." But their debt will not be reduced unless they agree to strangle themselves: they must pledge 20 to 25% of their national exports to servicing this debt, that is, not to the repayment of the principal but to the repayment of the interest due on the debt. According to the International Monetary Fund (IMF), these countries must practice "good management," which means repaying debts to the banks no matter how much misery this causes for their populations.
Lending money to these poor countries has been a profitable business for the banks. They have increased their loans to poor countries, collecting $8 for every $1 loaned in 1980. And the companies of the rich countries have benefitted as well as the bankers have. According to Action Aid, 80% of this kind of aid arranged by the U.S. or France goes back to the coffers of American or French companies. The terms of the loans specify that the countries must buy from these companies.
When all the figures are put together, last year poor countries paid 395 billion dollars more to rich countries than they received. This so-called development aid is very well-organized theft!
The IMF says barriers to the "free market" must be removed. But in fact, poor countries must exchange their raw materials and unskilled labor for more advanced technology. They get little in this exchange, so that they become poorer still. The cancellation of 40 billion dollars of debt will make no difference. Even if a larger reduction in debt were agreed to, the poor countries could not develop, for they are strangled by the laws of capitalism. The exchanges are always to the benefit of the capitalists in the big imperialist countries.