The Myth of Western Aid and the Silent War
Posted: Tuesday, January 1, 2002
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"Who decides that a hue and cry must be made about one kind of atrocity while another gets away unpublicised? Who sets the agenda which sees imprisonment and torture as human rights violations while torture and death by starvation are not? And what gives some countries the right to become international arbiters, ignoring the blood on their own hands?… It's time for people who care about human rights to adopt a new cause: the Third World person's right to exist. Our people are under fire from global terrorism of a terminal new order. Many have already been wiped off the face of the earth."
- MARI MARCEL THEKAEKARA, Tamil Nadu State, India.
"Never before in history have the poor financed the rich on such a massive scale and paid so dearly for their servitude as today."
- JOHN PILGER
As the twentieth century draws to a close, the world is guilty of a colossal failure of compassion for its poorest people. Today, more than a thousand million people live in extreme poverty. A quarter of the world's people are starving. One in three children are being denied adequate food, education and health care. More than half a million children die each year as a result of austerity programmes imposed by the West on the Third World. Every three seconds a child under five dies due to poverty. In the time it took you to read that last sentence, another child's life was lost due to policies that Western governments have decided to enforce on the rest of the world.
1998 marked 50 years of the global trading system which was set up under the 1948 General Agreement On Tariffs and Trade (GATT) and the World Trade Organisation (WTO). While the bankers and leaders of the world's richest countries toasted the "success" of this economic system at the 1998 Ministerial Conference in Geneva, the people of the Third World saw little cause for celebration. Not only is this global economic system directly responsible for the starvation of millions throughout the Third World - it can be said that it actually depends on the impoverishment of these people. There is no more apt description for such a deliberate and calculated agenda than genocide.
Up to the mid 1970s, the worst excesses of the capitalist system were held in check by democratic national governments and strong unions. Big business was forced by legislation, regulations and labour contracts to share its profits, at least on some minimal basis, with workers, consumers and the state.
Over the past two decades, however, all these external constraints have been disposed of. Globalisation, free trade, deregulation and the conversion of nearly all political parties to the free market agenda have combined to subvert democracy and disempower unions. Unchallenged, corporate domination has quickly spread across the planet, causing disparities and inequalities on an unsurpassed scale. Poverty, crime, violence, ethnic conflict and environmental destruction have escalated as a result.
Inequality is on the increase. In 1960 the ratio of the world's richest 20% of the population to the poorest 20% was 30 to 1. In 1993 that ratio had doubled to 61 to 1. Today, a citizen of the richest country is over 500 times better off than one from the poorest. The gap between rich and poor countries has never been so vast.
THE ORIGINS OF THE THIRD WORLD DEBT CRISIS
The impoverishment of the Third World can be traced back to the 1960s when the US government spent more money than it earned. To make up for this, Washington printed more dollars. Thus, the world's stocks of dollars fell in value. This was bad news for the major oil-producing countries of OPEC, whose oil was priced in dollars. The money they made from exports now bought less. So in 1973 they hiked their prices, making huge sums of money which they deposited in Western banks. Meanwhile, the world was plunged into a recession. As interest rates plummeted, the banks were faced with an international financial crisis. They lent the money out fast, to stop the slide, and turned to the Third World, whose economies were doing well but who wanted to maintain development and meet the rising costs of oil. The banks lent lavishly, eager to make use of their surplus capital, offering loans by the barrowload at very low interest rates to the leaders of any developing country they could find, without much thought about how the money would be used or whether the recipients had the capacity to repay it.
In the end, little of the money benefited the poor. The money was almost entirely wasted; roughly a quarter of it went on increased oil bills; a quarter on misconceived large-scale development schemes such as dams, many of which proved of little value; a quarter on the military (often to shore up oppressive regimes); and a quarter went into the private banks of corrupt leaders.
The world's economic system is in fact based on debt. Every country in the world is in the red, even the richest and most successful. Most of the money is owed to multinational banks and financial institutions. Rich countries can survive periods of high indebtedness if there is confidence and investment in their economies, but poorer countries are crippled by their foreign debts. Some now owe more to the West than their total Gross National Product (GNP). The five countries with the biggest debt burdens (as a percentage of GNP) are: Cote d'Ivoire (338.9%), Guinea-Bissau (340.7%), Mozambique (450.4%), Congo (454.2%) and Nicaragua (a staggering 800.6%).
At the current rates of interest, it is a mathematical impossibility for most Third World countries to pay off their debt. Many have had to agree to the process known as "structural adjustment" by the World Bank and the International Monetary Fund (IMF) - the two main financial institutions of the West - who have insisted on these countries' conversion to free-market economics.
By the mid 1970s, Third World countries, encouraged by the West to grow cash crops, suddenly found that they weren't getting the prices they were used to for raw materials like copper, coffee, tea, cotton, and cocoa. Too many countries - advised by the West - were producing the same crops, so prices fell. Then interest rates began to rise, pushed further by an increase in US interest rates, and oil prices rose again. Third World countries were now earning less than ever for their exports while paying more than ever on their loans and imports. They had to borrow money just to pay off the interest. Debts piled up and the repayments mounted ever more as the commodity prices that most developing countries depended on sank through the floor (by mid 1987, they were at their lowest level for 50 years).
New loans by the World Bank and IMF have only added to the burden. Since 1980 debt to the World Bank has increased five times; in effect the poorest countries became bankrupt. The oldest human rights organisation in the world, the Anti-Slavery Society, has declared that debt is "contemporary slavery" and interest payments a form of national bondage.
IN THE GRIP OF THE WORLD BANK
The World Bank is run from Washington by a hierarchy of rich shareholders from the developed countries, and it is under the constant influence and manipulation of the United States. Loans from the World Bank and the IMF come with draconian conditions aimed at diverting the borrower's resources away from meeting domestic needs and towards fulfilling the Bank's corporate agenda. Elected governments have been forced to impose very strict economic policies, known as Structural Adjustment Programmes (SAPs) which have opened their markets to "free trade" - a euphemism for exploitation by transnational corporations (TNCs).
SAPs supposedly consist of measures designed to help a country repay its debts by earning more hard cash, but in most countries SAPs have worsened the economic situation and the poor have been hit the hardest. SAPs have particularly affected the countries of sub-Saharan Africa, whose economies are already the poorest in the world. In 1980 sub-Saharan Africa owed the West $60 billion. By 1997, after the introduction of structural adjustment, this had risen to $219 billion - $357 for every man, woman and child in the region, much more than a year's wage for many.
In the eyes of the people running the World Bank and the IMF, services that are "public" (i.e. those that people don't pay for directly, such as health, education, welfare, transport services, etc.) are deemed to be an unfair subsidy by the government. The private provision of services (which people do have to pay for) is looked on much more favourably. Other areas, such as clean air, reasonable conditions of work and health and safety considerations, are deemed irrelevant to trade.
Under the terms of the World Bank and IMF's structural adjustment programmes, the governments of poor countries are forced to cut spending on health, education, social services and welfare; to devalue the national currency; to cut back on food subsidies; to cut jobs and wages for workers in government industries and services; and to take over small subsistence farms growing staple foods and replace them with large-scale export crop farms. The SAPs also demand lower taxes on high income earners, privatisation of public industries (including their sale to foreign investors) and lower tariffs on imports. Third World nations have been forced by the IMF and World Bank to sell off state-owned enterprises at bargain basement prices. In 1990, more than 7O countries had privatisation programmes in place and sold off state firms worth $185 billion.
The results are lucrative for the West but socially disastrous for the poor countries, who have sunk deeper into recession, with mass unemployment, starvation and ill health. Millions of people in the developing world are trapped into a life of poverty and misery with little hope of improving their quality of life. Nonetheless, IMF loans are withheld if a country does not accept the terms of the West's plans. If ordinary people oppose these policies, the Bank and IMF are quite prepared to tacitly support violent suppression of demonstrations or protests. Thousands of people have been arrested or injured in protests in more than 30 countries implementing SAPs.
STRUCTURALLY ADJUSTING THE POOR
As the poor countries have been forced to relax foreign investment restrictions, Western transnational corporations have expanded investment in the Third World and there has been an exodus of Western industries to low wage Third World countries. In 1991, nearly 30 countries made it easier for multinationals to invest and corporate investment jumped from 19% of total foreign investment in 1990 to 30% in 1992.
The dependence on exports has made these countries vulnerable to the vagaries of the global market and has benefited only foreign investors and domestic elites. Most corporate investment goes to the rich world; of the $150 billion of direct foreign investment in 1991, more than two thirds went to the industrialised nations of the West.
Spending on healthcare has fallen drastically in many of the world's poorest countries since structural adjustment was introduced. In Zimbabwe, for example, spending per head on healthcare has fallen by a third since 1990 when a Structural Adjustment Programme was introduced. In Uganda, £2 per head is spent on healthcare, compared with £11.50 per head on debt repayments. After decades of falling numbers, the number of children who die before the age of five has risen in many indebted countries, including Zimbabwe, Zambia, Nicaragua, Chile and Jamaica. Diseases once thought to be eradicated, such as tuberculosis, yaws and yellow fever, are making a comeback as treatment and vaccination decline.
Massive job losses have also followed structural adjustment. Throughout the Third World, unemployment has gone up by 400% to 100 million. In Zambia, Tanzania and Ghana, over 20% of the working population are unemployed. In Mexico, Costa Rica and Bolivia, average wages have fallen by a third since 1980. Wages in most African countries have fallen by 50-60% since the early 1980s.
Many Western economists have seen the fallacy of SAPs. Hans Singer, a development specialist, stated: "The results of structural adjustment have been poor, indeed negative. The social costs have been enormous…. Growth has not happened, debt has not disappeared and investment has fallen."
SAPs demand that countries increase their export crops - and as many poorer countries are encouraged to grow the same crops, they cause a glut on the international market and prices fall, resulting in even lower wages for the workers on plantations and farms. Mexico first grew maize as a staple crop thousands of years ago, but today, thanks to World Bank/IMF economic policies, it has to import 20% of this staple food from the USA. The IMF encouraged Mexico to replace its vital food crops with cash crops like strawberries and exotic fruits. The IMF also made sure that any trade protection for the country's agricultural goods was lifted, so Mexico's export crops now compete with those from the USA, which are highly subsidised and use all available techniques to improve their quality. In such a one-sided fight, Mexico is the inevitable loser; almost 20% of Mexicans have no cash income; more than a third of the population make less than the minimum wage of $3 a day.
Since 1972, the Philippines' national debt has risen from $2.7 billion to $29 billion. Much of this was the result of secret and often fraudulent deals by the dictator Ferdinand Marcos and the World Bank. The Bank and the IMF quietly approved of Marcos and worked to keep him in power. According to internal World Bank documents, the martial law imposed by Marcos in 1972 made possible the "economic reforms that opened up the economy to the influx of foreign capital". Within two years, during which democratic institutions in the country were trampled on, World Bank loans to the Philippines increased fivefold. Since 1972 the World Bank poured more than $7.5 billion into the Philippines; during that time the growth rate fell and poverty rose by a third.
Marcos is believed to have looted some $15 billion from the Philippines' economy. In 1976, in return for $4.5 billion the IMF had given to him, Marcos built a number of luxury hotels to accommodate the World Bankers for their annual conference in Manila. Marcos sent the bill to the city authorities, who passed it on in municipal taxes. The poor of Manila are still paying it off. In 1981, US vice-president George Bush raised his glass to Marcos and said, "We love you sir… we love your adherence to democratic principles and democratic processes."
IMF structural adjustment of the Philippines led to the establishment of 'Export Processing Zones' in areas where food was once grown in abundance. This means that virtually all the forests will be lost within a few years. The IMF is currently demanding further reductions in public spending, a freeze on wages and new taxes. The Philippines' National Economic Development Authority estimated that as a result, 50,000 workers will lose their jobs in 1999. The Department of Health estimated that 399,000 children would be denied milk and vitamins, and 103,000 tuberculosis sufferers would be denied medical treatment.
The implication is clear: as a direct result of World Bank/IMF policies, tens of thousands of Filipino children will die - silently and unnecessarily. The Institute of Policy Studies in Washington has calculated that one child dies every hour because debt repayments consume vital services like health care.
Mozambique is another country that has paid a heavy price for the debt burden forced on it by the World Bank. During the 1980s the newly independent country of Mozambique helped the African National Congress in neighbouring South Africa to fight for majority black rule. South Africa's apartheid state fought back brutally, waging a war against Mozambique that did an incredible $25 billion in damage; a million people died and a third of all Mozambicans were forced to flee their homes. South African-backed Renamo guerrillas attacked factories, railways, bridges and other social facilities, crippling the economy.
They destroyed half the country's schools and hospitals - even massacring patients as they lay in their beds. The crisis was made worse because the United States and the West backed the apartheid South African forces as a bastion against Communism during the Cold War. When apartheid ended, South Africa stopped waging war on Mozambique but the country had been forced to borrow huge amounts of money for importing oil, food, clothing and arms for defence. With the collapse of the Soviet Union, the Mozambican government decided it had no option but to make a sudden and complete U-turn. It turned straight into a market economy dictated by the IMF, with strict monetary control, free trade and privatisation.
The IMF demanded that the Mozambican government reduce its spending, while insisting that it could not decrease the repayments of its debts. By 1992 the debt had mounted to more than $7 billion. Since then, Russia and many European countries have cancelled some of this debt, but $5 billion remains. Civil service salaries were slashed and nurses and teachers slipped below the poverty line. Some 100,000 workers - 25 per cent of the industrial workforce - lost their jobs as a result of privatisation. Each year, Mozambique is supposed to pay $350 million in interest on the outstanding debt, plus some repayments of the debt itself. In reality, Mozambique can only afford to pay less than a third of this - and the unpaid money is added onto the total debt. The country is caught in a trap from which it can never escape.
In 1976 Switzerland was 52 times richer than Mozambique; in 1997 it was 508 times richer. Mozambique is the poorest country in the world today.
Mozambique is not alone. All of Africa is caught in a similar trap caused by wars, falling export prices and other IMF-imposed policies. The people of DR Congo, for example, are now expected to repay $13 billion which was lent to ex-president Mobutu, who was supported as an anti-Communist ally by the West, despite their knowing that he would use the money to build palaces and filter the money into Swiss banks. Within the next two years, half the population of Indonesia will join the millions in sub-Saharan Africa who live below the poverty line.
India too has started along the road of structural adjustment, despite the disastrous results evident in Asian, African and Latin American countries. In 1991-2, a financial crisis persuaded the Indian government to borrow money from the World Bank/IMF. In return for the loan, the government promised to implement an ultra-liberal economic programme. By May 1993 India had, for the first time in its history, a budget which openly and unashamedly pandered to the rich.
Refrigerators, cars and colour TV sets became cheaper. A top-of-the-line colour TV had its price slashed by 2,500 rupees ($80) and advertisements now urge the rich to buy their second TV for the kids' bedrooms. But ration rice, the absolute basic food necessity in India, became more expensive, forcing the poorest to buy less food for their families.
In the railways, banks and steel manufacturing industries, the workforce was cut by 25% in just over two years under SAPs. During the same time, the number of unemployed in the cities increased by 4 million. Out of the active rural population of 400 million, there are now 110 million unemployed. Government figures estimate that 40% of India's population live below the poverty line.
India's poor face a chronic protein deficiency anyway because their diet consists of bulk rice and little else. Now that they have less rice, a heavy toll is being taken on their health, especially women and children. After five years' of health education, and of trying to encourage people to eat dal pulses (the only protein available to the poor), the price of dal has become prohibitive. Community health programmes are seeing children under five who have just made it out of malnutrition slipping back because their parents are buying less food. Ailments such as measles, diarrhoea and chest infections, which can be easily warded off by healthy children are wiping out malnourished children.
Hundreds of thousands of people have been made homeless all over India by flooding caused by World Bank dams and irrigation schemes, which have ignored the environmental impact. World Bank-sponsored hydro-electric projects have flooded over three million people off their land.
"If UN members can impose sanctions on Iraq and South Africa, environmental pollution and wasteful consumption are no less an act of war and a violation of the human rights of the people of the south."- MANEKA GANDHI, former Minister of State for Environment and Forests in India
"Debt is tearing down schools, clinics and hospitals and the effects are no less devastating than war."
- Dr ADABAYO ADEDEJI, former Under Secretary General of the UN
In China the Xiaolangdi Dam Project has relied heavily on World Bank loans, despite the fact that many independent experts have made it clear that the dam will have serious environmental consequences. The World Bank is equally unconcerned that hundreds of thousands of people are being forced out of their homes and resettled elsewhere, where they are suffering a serious drop in living standards, education and employment opportunities. The World Bank is also helping to fund a major water transfer project in Shanxi province in China. In return for the loan, the Bank insists that the Shanxi government must "commercialise" the water supply. The result will be that even something as basic as water will become too expensive for many poor farmers.
The current IMF loan programme for Ecuador has no less than 167 demands, which include the following: the country's government must raise the price of cooking gas by 80%. It must eliminate 26,000 jobs and halve real wages for the remaining workers by 50% in four steps in months specified by the IMF. It must transfer ownership of its biggest water system to foreign operators by July 2001 and it must grant BP's Arco subsidiary the right to build and own an oil pipeline over the Andes.
As Lobster magazine eloquently put it, "the only meaningful difference between the American international loan-sharking operation run by the IMF and US armed forces and the street level gangster version is this: the gangsters don't go round preaching to their victims that the beating and expropriation is going to be good for them."
In 1997 the European commission and World Wide Fund for Nature (WWF) completed a devastating report about the destruction of tropical forests in developing countries, which named Third world governments, multinational companies, the World Bank and IMF of involvement in a conspiracy which threatened to destroy much of the remaining virgin primary forests in the Caribbean rim, central Africa and Pacific within five to ten years, due to the expansion of unsustainable logging operations.
The report named companies prepared to bribe and bully their way to lucrative logging concessions and blamed the IMF and World Bank for inducing countries to sell their forests for a quick cash return to pay off debts to the West. However, the report was suppressed for three years by the European commission, who were fearful of the repercussions if they named names and a second version of the report was printed with the names taken out - but even this was watered down.
The report stated: "Many of the countries are suffering severe economic difficulties with large foreign debts, high inflation and unemployment. In the majority of countries, decision making is controlled by a small group of powerful people or clans within the government that look at primary forests of their country as a short-term source of personal revenue, not as a productive ecosystem which can generate social, economic and ecological benefits on the long term for the entire country and its people."
The Solomon Islands, Papua new Guinea, Cameroon and Belize were all named as suffering large scale corruption and the report blamed the main donors to these countries - the World Bank, Japan, the EU, France, Germany, the UK and the US - for failing to enforce their own rules to promote forest conservation and responsible management. In fact the World Bank and IMF made things worse by imposing monetary reform on these countries, urging them to allow multinational companies and the selling of their forests for cash to pay back debts.
REAPING THE PROFITS
Structural adjustment programmes do benefit some - rich landowners, business tycoons, bankers, financiers, shareholders and heads of foreign multinational corporations. It is ordinary people and their children who pay for these peoples' luxuries.
Transnational corporations now have almost total control over the process of globalisation. Two thirds of international trade is accounted for by just 500 corporations; the ten largest TNCs have a total income greater than 100 of the world's poorest countries.
TNCs and banks have no national loyalty; they can be located anywhere and can operate effectively at any distance. They are unanswerable to no-one but their investors and shareholders, who are interested exclusively in making profit. At present, there is no government or regulatory body to monitor or tax their overall behaviour. The result is that these corporations enjoy vast economic power without accountability or concern for social justice.
In theory, both the World Bank and the IMF are overseen by a Board of Governors, consisting of one governor for each member country; in practice, authority is delegated to a Board of 24 full-time executive directors. The World Bank says that "most of the decisions are made by consensus"; this is a consensus that always goes along with the aims of the ruling classes of the seven richest governments in the world (Canada, Italy, Japan, France, UK, Germany and the US), known collectively as the G-7 (now called the G-8 with the participation of Russia)
The top three beneficiaries of foreign investment in the Third World are France (reaping $138 billion a year), Britain ($199 billion) and the United States (raking in a massive $477 billion).
Western countries are the sole beneficiaries of the free trade- promoting "Uruguay Round" of the General Agreement on Tariffs and Trade (GATT). As a result of this, the poorest countries will lose $600 million a year to the West and sub-Saharan Africa will lose $1,200 million.
Meanwhile, the number of poor countries catching up with the industrialised states, in per capita terms, has fallen by three quarters in the past quarter century. In other words, poverty has never risen so fast.
The 6,000 employees of the World Bank enjoy a lifestyle a world removed from the penury of the people they are exploiting. Middle-ranking civil servants of the Bank earn 300 times the income of half of humanity, with perks including first-class air travel and deluxe hotel accommodation, costing over $50 million a year.
In October 1991, the World Bank held its annual conference in Bangkok. A few weeks before the conference began, a small town of people living beside the railway tracks along the route from the airport was bulldozed, including homes, a kindergarten and a school. The poor people were moved to wasteland well out of sight of the World Bankers. Each was given £90 as "removal expenses". They had no electricity and running water, and the army demanded its tents back once the conference was over.
A vast conference centre, with gilded lacquer and other adornments was built for the occasion. A three-star chef was flown in from Paris, accompanied by turkeys from the famous Bresse region. Belgian caviar was flown in from Iran, smoked salmon from Norway and prime rib from the US. Following the seminar on the conversion of socialism to capitalism and "the lessons learned", the delegates enjoyed a party featuring a display of gems consisting of an 89-karat diamond, a 100-karat emerald and a 336-karat opal. In a country where children routinely die from malnutrition and preventable diseases and where low wages, child labour, prostitution and illegal sweatshops support the "growing" economy" advocated by the World Bank, the poor ended up paying for this extravagance.
"Whose side are we on in the Third World War: the present war against the Third World, the war against the poor, the silent scandalous sacrifice of the children who perish in sight of images of luxury and excess?"
- JEREMY SEABROOK
"Inequality is an evil both in itself and because it is a cause of poverty. One of the chief reasons why the poor are very poor is that the rich are very rich."
- DOUGLAS JAY
THE MYTH OF AID
For all their expositions of magnanimity, the world's richest governments are not committed to eradicating global poverty. In 1998 total aid to poor countries from member states of the Organisation for Economic Co-operation and Development (OECD) was cut to the lowest level since 1950, to an average of only 0.22% of total GNP. The UN has set the target for overseas aid to 0.7% of a country's GNP. Only the Netherlands and Sweden currently meet this target and the US aid budget is the lowest of all Total aid from OECD countries fell by $3.8 billion in 1996, a decline of 4.2% in real terms from 1995.
There is little indication that this decline will be reversed. A 1997/98 Reality of Aid report condemned the fact that insufficient aid was being channelled to where it was most needed. While the poorest countries received a smaller share of aid, wealthier countries in Central and Eastern Europe enjoyed a 10% increase in aid.
"Aid can and does work, especially when it reaches people living in poverty, and when it focuses on things like education, health and clean water. Instead, governments, especially the G8, are focusing on new markets in developing countries where they can make a profit, and letting the least developed countries fall by the wayside."
- SABINA SINISCALCHI, chair of Eurostep
The great myth about aid is that Western banks lend money to Third World governments to help them develop their countries. In fact the majority of aid is not spent on direct poverty alleviation; most is tied to trade deals or debt repayments. In 1997 debt-service payments from sub-Saharan Africa amounted to 80% of aid. By making such loans, the West creams off huge amounts of interest paid by the poor countries. If indebted governments threaten to break off interest repayments, they are starved of further loans.
During the period 1983-90 for instance, the poor countries paid £98,000 million to the rich countries. That's a net figure, after taking into account new loans and all aid. It works out at about £1.4 million per hour. In 1995 alone, the poorest countries paid $1 billion more to the IMF than they received from it. The four main high street banks in the UK - Lloyds, Natwest, Midland and Barclays - have done very nicely out of this, making substantial profits from Third World debts, while collecting over £1 billion in tax relief on loans that are still current.
In 1985 Live Aid raised £50 million for the starving people of Ethiopia. That year the country had to pay £65 million in interest payments on loans from Western banks. At the same time 40 million tons of grain - enough to feed the starving ten times over - were stockpiled in Europe at a cost of £5 billion a year. Overall during the l980s, the Third World sent to the West $220 billion MORE than was sent to them in any form.
THE HYPOCRISY OF THE WEST
While decrying the lack of funds for foreign aid and famine relief, Western governments have never found money short when it comes to financing war. The World Bank found over $62 million to pay for bombs dropped by American B52 aircraft on Iraq during the Gulf War; this was the equivalent of Oxfam's entire budget for the year. £105 million was found to replace five British Tornado aircraft which crashed or were shot down during the war. This would have brought enough grain to feed for one month all the 20 million people likely to starve in Africa this year. And £3 million was found to train one Tornado pilot. This would have provided 25,000 Eritrean families with enough seeds and tools to recover from the current drought. In 1990 the British government gave to famine relief in Africa about the equivalent of two days' British military operations in the Gulf War. The next year the figure was even less.
Each cruise missile dropped in the 1999 Balkans crisis cost $1 million; the cost to NATO of bombing Kosovo and Serbia for four months was over $150 billion. Just a tenth of this sum would have provided massive economic regeneration of the region with a much greater chance of a lasting peace which protects the rights of the Kosovar Albanians.
The annual running costs to the British government (paid for by taxpayers) of the Trident nuclear submarine programme amounts to £1,500 million every year for the next 30 years.
Poverty is one of the root causes of violence. Many of the poorest countries in the world are currently engaged in, or emerging from conflict. Protracted war inevitably leads to highly militarised societies. But far from seeking to steer these countries towards peace, Western governments have a vested interest in maintaining the global arms trade. War provides lucrative markets for arms dealers.
Many Third World countries have become deeply indebted because of high military spending. In order to purchase arms, poor countries cut public expenditures in health and education and borrow foreign exchange. The poor become poorer and conflict becomes more widespread. This sets up a vicious circle of debt, underdevelopment and conflict. It has been estimated that between 1960 and 1987, Third World governments borrowed around $400 billion to fund arms imports from the West.
The British government has supposedly committed itself to the halving of global poverty by the year 2015 through the promotion of pro-poor bilateral aid programmes and by reform of the stringent conditions for debt repayments. Yet the British government's enthusiastic support for the arms trade undermines many of the goals of its debt and development agendas. Britain now sells almost a quarter of the world's arms, actively promoting the sales of its weapons to the Third World with extensive export credits to subsidise arms sales. In 1993/4, 50% of all export credits provided by the Department of Trade and Industry were for arms sales. In time, these credits became further debts for poor countries.
The Western banking system is at the heart of the global arms trade. Without the support of Midland bank, who underwrote the sale, the export of British Hawk ground-attack aircraft to Indonesia would not have been so straightforward; without the investments of pension funds and insurance firms, British Aerospace and other major arms traders would not have quite such a healthy turnover.
In 1997, 73% of the exports of major conventional weapons from the West were to developing countries, and 87% of the world's arms were supplied by member governments of the UN Security Council.
"The damage done to us now and in the future by a system that fills our heads with artificial needs so that we forget our real needs - how accurately can it be assessed? Can the mutation of the human soul be measured? The spread of violence, the debasement of daily life? The West is living the euphoria of victory. The collapse of the East served up the vindication: in the East it was worse. Was it worse? Rather, I think, one should ask whether it was essentially different. In the West: justice sacrificed in the name of freedom on the altar of the god of productivity. In the East: freedom sacrificed in the name of justice on the altar of the god of productivity. In the South, we still have to ask ourselves if that god deserves our lives."
- EDUARDO GALLEANO
THE IMPACT OF THE DEBT CRISIS ON ALL OF US
The debt crisis does not just affect people living in poor countries, but also those in developed countries. Many of the results of Third World debt boomerang back to hurt the West because taxpayers here have paid for billions of dollars in tax relief for unpaid debt to Western banks.
The unsustainable exploitation of Third World countries' natural resources has caused massive environmental destruction, contributing to increases in the greenhouse effect and global warming. Many ill-conceived development projects, such as large dam projects, power plants and charcoal-driven industries, began in Third World countries under structural adjustment programmes; apart from failing to help the poor, these have also caused serious environmental damage. According to the 1998 United Nations Human Development Report, environmentally-damaging industrial activities have been subsidised to the tune of over $170 billion every year. $710 billion is 14 times what is required to eradicate poverty in the world.
As Third World debts have mounted, environmental conservation programmes have been axed. It is the world's poorest countries who are chopping down their forests the fastest. Brazil is one of the world's largest debtors, owing $112 billion to the West; it is cutting a staggering 50,000 sq. km of forest every year.
In 1985 the Brazilian rubber-tapper Chico Mendes sent a letter to the World Bank protesting about the suffering caused to the Uru Eu Wau Indians in the north-west of Brazil as a result of a $300 million World Bank funding of a main road through the state of Rondonia as part of a development scheme. This had destroyed small communities of Indians and rubber tappers and led to large-scale clearance of the rainforests. The letter brought world-wide attention to Mendes as an impassioned environmental campaigner and defender of the "people of the forest". He was murdered by a landowner in December 1987. The World Bank's projects in Brazil continue today.
Thailand too faces an environmental disaster, with its great forests wiped out by uncontrollable logging and profiteering. In its report, The World Bank and the Environment 1993, the World Bank itself timidly acknowledged that for many of its projects, consultations with affected populations and local non-governmental organisations "have been limited at best".
Workers in the West are losing out on earnings from many factory and farm produced goods because it is so much cheaper to import them from the Third World. At the same time they are unable to export equipment and other manufactured goods to former trading partners in the Third World because those countries have no money to buy them - so jobs are also lost in the West. Before the debt crisis, Europe sold about a fifth of its exports to the Third World, particularly Africa. By 1990, it was only a tenth.
Struggling to repay debts, many poor countries have turned to the lucrative drugs trade to raise foreign capital. For instance, Bolivia is one of the poorest countries in Latin America, with the highest child mortality rate on the continent. The country has to spend half of its export income on paying its debt. It is estimated that no less than 40% of Bolivia's workforce depend on the drugs trade for a living.
THE NEW AGENDA
An astonishing 70% of all international trade is now controlled by just 500 corporations. The state of the world is increasingly being determined by the shadowy figures in the boardrooms of these corporations, rather than by elected governments. Without any major media exposure or democratic accountability, the World Bank and IMF have quietly finalised their most destructive treaty to date. This is called the Multilateral Agreement on Investments (MAI). The U.S. has been at the origin of MAI and is pushing to have this agreement adopted as quickly as possible by the rich industrialised countries of the OECD. MAI has so far received very little public attention but it is a devil's pact that will further enforce the dominance of transnational corporations over the entire planet and its dwindling resources, while bulldozing human rights and the fate of the poor. The MAI gives TNCs expansive new rights and powers (without any responsibilities) while burdening countries with new obligations to the corporations.
Amongst the MAI's agendas are:
Governments are required to give foreign investors access to all economic sectors. It abolishes the rights of all citizens and governments to control the entry, conditions, behaviour and operations of TNCs in their country.
If governments refuse to allow TNCs to do as they wish (for instance, by banning a corporation's products because they are dangerous), the government will have to pay stiff penalties.
TNCs will be given further powers to take law-suits against governments to protect their interests. For instance, a US corporation which has been barred by the Canadian government from selling its gasoline additive in Canada because it is harmful to people's health, is suing the Canadian government for $350 million in estimated lost revenues on the sale of the product in Canada.
The MAI attempts to bypass international standards, social security measures, and environmental laws. Under the MAI, foreign investors' rights are given legal priority over other countries' laws. The adverse social, economic and environmental consequences of the activities of TNCs, which occur now, even when they are subject to government legislation, will be greatly magnified. The power of democratically elected national or local governments to regulate TNCs and protect local people and their environment will be removed by this treaty.
In short, the MAI puts into practice the ideology that the entire natural and social diversity of the world are resources to be freely controlled and exploited by global corporations. The effects will be catastrophic.
WALLPAPERING THE PROBLEM
The right-wing ideologues who defend and run the global economic system see nothing wrong with it. For them, it is a process of weeding out the weak and the unfit. They have no compassion for people in other countries who suffer due to their policies; in their view, those who can't cope or compete don't deserve to survive. This is the rationale of the New World Order, the global economy.
The World Bank and the IMF have long been adamant that any cancellation of Third World debt is completely impossible. However the recognition that much of this debt is totally unpayable finally caused the Bank to agree, for the first time ever, that some debts could be cancelled. In 1996 the Bank agreed the Heavily Indebted Poor Countries (HIPC) Initiative, ostensibly intended to cancel a portion of some poor countries' debts. However, despite the Bank declaring that HIPC would "free budgetary resources" and allow poorer countries to "broaden the scope of their health and development efforts", it has turned out to be a cruel hoax.
In April 1998 Mozambique was by far the biggest beneficiary of HIPC, with over $2 billion of its debts supposedly "cancelled." This, however, turned out to be nothing more than an accounting trick. The World Bank and IMF agreed to cancel only that part of the debt that Mozambique was not paying in any case - that part which was being "rolled over" each year. HIPC only cancelled the uncollectable debt. After HIPC, the country is still paying back $100 million a year; just $10 million less than the $110 million it has been able to pay. Each day Mozambique's government pays just $100,000 for the country's entire health service; each day it pays $275,000 in debt repayment. The World Bank has lent Mozambique an extra $25 million a year for health, but this has merely forced the country into deeper debt.
Conservative foreign office minister Douglas Hurd once stated that Britain "will not give aid to any country unless the market dominates its economy". New Labour has readily adopted the Tories' mantle of free market economics at all costs. While Tony Blair's new Clause IV enthuses about "the enterprise of the market and the rigour of competition", Blair's Trade and Industry secretary Stephen Byers recently declared that "wealth creation is now more important than the redistribution of wealth" and went on to tell his audience in the City of London that "Government should not hinder entrepreneurs but work to ensure the market functions properly and contributes to creating a strong, just and fair society."
One of the beneficiaries of the kind of strong, just and fair society created by the market was Paula Duarte, a seventy-three-year-old pensioner living in downtown Buenos Aires. When the Argentine government bowed to World Bank pressure and slashed pensions in the spring of 1992, Paula began looking desperately for work. On August 20, still unemployed, she hanged herself with a nylon cord from a tree outside the University of Buenos Aires Law School. In her purse were just two pesos.
Paula Duarte's suicide was one of many among Argentine's pensioners. The World bank had insisted on a draconian reduction of social security benefits "to restore business confidence" and stabilise the shaky Argentine economy. The government of President Carlos Menem cut payments for most of Argentine's three million pensioners to just $150 a month - less than half the minimum needed for food and shelter. As neighbourhoods set up emergency food programmes, the Menem government tried to downplay their plight. Economy Minister Domingo Carvallo told pensioners they should get jobs (even though unemployment stood at record levels) or seek aid from their children. When a journalist asked Menem to explain why so many old people were taking their lives, he replied: "I am the President of the Republic, not a psychologist!"
When 32 residents of a government-run home for the elderly died of malnutrition, a storm of public criticism led to the resignation of the health minister, Mathilde Svatetz, a protégé of Carvallo's. But the cutbacks have continued.
Throughout the Third World millions of people are dying as a direct result of such blinkered belief in the absolute importance and infallibility of unfettered market forces. The mantra of free-trade is repeated endlessly by the leaders of Western governments as if they are God-given, incontrovertible truths. They argue that when all barriers are removed, the economy will function at a height of efficiency and benefit all. This is a folly of the most idiotic, blinkered kind. The introduction of free market economics to the Third World has resulted only in the greatest inequality between the rich and the poor in human history.
Menem and Carvallo were not the first Latin American leaders to be pressured by the World Bank to cut pensions. That distinction went to General Augusto Pinochet, the military dictator of Chile, back in 1981. When the World Bank and the IMF demanded that pensions be slashed, he did so. Peter Munk, chief executive of Horsham Corporation, one of the West's major investors in the Chilean free market, exuberantly praised General Pinochet at the company's shareholders meeting, for having turned Chile into one of the highest "profit per capita" countries in the world. His enthusiasm was not mirrored by the half of all Chilean workers who were suffering cuts so deep that they were getting pensions below the poverty line.
Encouraged by its "success" in Chile, the World Bank launched a world-wide campaign for lower pensions as part of its push to cut back public programmes and privatise public services. World Bank teams demanded access to the pension administrations of half a dozen Latin American countries in the mid-1980s and sharply criticised the existing systems. World Bank experts such as William McGeevy argued that with increasing numbers of older citizens, Third World governments simply couldn't afford to offer them adequate pensions; that was a luxury that only the richest countries could now afford. As a result of such demands, Latin America's 14 million pensioners received, on average, less than half the sum needed for "minimum necessities".
Pension cutbacks have now spread well beyond Latin America. In Eastern Europe and the former Soviet Union, pensioners have been selling their home furniture to buy bread, due largely to the "shock therapy" reforms imposed by the World bank and the IMF. China, with 100 million older citizens, is now at the top of the Bank's priority list for pension cuts.
Despite Tony Blair berating the Tories while in opposition for their mishandling of the economy, once in office, Blair took great delight in appointing three former Tory ministers to sit on a new government economic body - the British-Mexican Business Network, which aims to promote foreign trade with Mexico. No Labour member will sit on this body. The three Tories appointed by Blair are: ex-chancellor Kenneth Clarke, Lord Walker the former Welsh secretary and Lord Garel Jones, the former Foreign Office Minister. Clarke is deputy chairman of British American Tobacco, which has investments worth $1.7 billion in Mexico; Lord Walker is a director of financiers Dresdner-Kleinwort Benson; while Lord Garel Jones is a director of the Union Bank of Switzerland. Downing Street insisted that the three were chosen for their business expertise, apparently oblivious to any conflict of interests that the three might have in playing such a critical role in Mexico's economic affairs. Tony Blair's definition of "business expertise" appears to include the plundering of Third World countries such as Mexico.
If Blair and the other leaders of Western governments took the time to witness the reality of the effects of the free market, they would see that the gross inequalities between rich and poor countries are now worsening. Today, 20% of the world's population accounts for 86% of consumption. Westerners spend $37 billion a year on pet food and perfumes. In its 1998 Human Development Report, the UN says that amount would provide education, food, health care, water and sanitation for all those now deprived of those basics - with $9 billion to spare. Children in the Third World are starving to death so that their counterparts in the West can consume up to 20 times more resources "freely".
More people are becoming aware of the cracks in the system of global finance. Coalitions between movements such as the Campaign Against the Arms Trade and the Jubilee 2000 campaign for a one-off cancellation of the backlog of unpayable Third World debt by the year 2000 are mobilising public support. In May 1998 at the annual G8 summit at Birmingham, England, the leaders of the world's seven richest countries found their conference hall surrounded by 70,000 protesters holding hands to form a human chain calling for the cancellation of Third World debt. In June 1999, Jubilee 2000 organised hundreds of thousands of campaigners in over 20 countries to highlight the issue of debt relief before the G8 summit in Cologne, where a petition signed by 12 million people was delivered to the leaders of the G8 countries.
There have been many demonstrations throughout the Third World against World Bank/IMF-imposed policies. In South Korea, the biggest strike in the country's history forced the government to repeal part of a new labour law that was originally passed through the Korean parliament in secret. The strike terrified many of Asia's business and government leaders who were worried about similar protests taking place in their own countries.
Such international grassroots protests have had a dramatic effect in forcing the G8 leaders to discuss new initiatives on debt, and the World Bank itself has conceded that its structural adjustment programmes are harmful to the poor. Under pressure from intense international protests in the run-up to the G8 summit in Cologne, the Bank announced a $50 billion deal of debt relief. However, this was another of the Bank's con tricks; half of this figure did not represent actual money for the countries concerned but simply wrote off debts which were never going to be repaid and on which they were not meeting the annual interest bills.
Despite President Clinton's public proclamation that no country should be left with a "burden that keeps it from meeting its peoples' basic human needs", behind the closed doors of the G8 summit, the US showed its determination to link any debt relief to strict compliance with even more stringent economic "reform" programmes, while the World Bank insisted that Third World countries adhere to a further three years of SAPs before they get any debt relief.
Toronto, London, Naples, Lyon, Cologne, Okinawa - the annual world summits attended by the leaders of the G8 countries since 1988 to solve the problems of third-world debt have been little more than expensive talking shops full of empty words and promises while no significant progress on debt reduction has yet to take place.
Barely $15 billion of the $100 billion that rich nations promised to wipe off debts last year has actually been cancelled. The last G8 summit meeting at Okinawa in Japan was the most expensive ever, costing an astonishing £500 million, a sum big enough to have saved an entire African country. In fact Japan spent more on hosting the leaders of the world's seven richest nations for one weekend than it has contributed so far to the cause of cancelling third world debt. Amongst the entertainments lavished on the delegates were parades and song-and-dance troupes by a thousand artists and musicians performing on a floating stage on the shoreline. There was even an official G8 summit theme song called Never End. For those in the third world crippled by debt, the title could hardly be more appropriate.
Jubilee 2000 campaigns now exist in 38 countries, North and South, but a lot more campaigning is needed to convince the leaders of the West of the need for change. They must be made to view the world not just in terms of "markets", but in terms of ethical considerations and the social consequences. They must accept moral responsibility for the suffering and deaths their policies have caused throughout the Third World.
The West is not richer than the Third World because it is intrinsically "better" or more efficient; its riches are a direct result (in fact dependent upon) the exploitation of the Third World. The leaders of the West must be made to realise that their wealth should carry with it social obligations and that there is no "acceptable" level of poverty or hunger. And Third World starvation should be placed on the human rights agenda.
The idea of "social credit" is enjoying a renaissance among radical and green economists. Under the current system, private sector banks have been allowed a virtual monopoly over the creation of credit. Social credit seeks to counter economic globalisation by securing control over the institutions of finance by local communities, enabling socially-aware and economically responsible policies to be put into effect. The replacement of money lending with investment and the redistribution of wealth may not be acceptable to the West, but it is crucial to a development of the Third World which combines economic growth with political stability and ecological sustainability.
According to World Bank figures, developing countries owed $1.9 TRILLION to the West in 1996. The gap between rich and poor has never been so big in all the world's history, and the need for radical change has never been so great. Reforming the world's economic system may seem impossible. It is easy to say that nothing can be done; those who argue that there is no alternative to the current system say that there will always be poverty; that some people are born into it and there will always be inequalities; that there just aren't the resources or capital available to eradicate poverty world-wide. These are lies.
The world has all the resources and finances to deliver the basic needs of all its people, if only there was the collective will. Jubilee 2000 has calculated that it would cost each taxpayer in Britain just £2 per head to cancel debts owed directly to Britain by the poorest countries. And a mere 16% of the amount allocated to military spending in the developing world could provide basic health care and education for everyone in the world.
The 358 richest people in the world own, between them, more than the annual income of the poorest 45% of the world's population, some 2.5 billion people. These billionaires have a combined wealth of over $1 trillion. Just 4% of this wealth - $60 billion - would be enough for basic education, healthcare, adequate food, safe water and sanitation for all the world's people.
In 1998 the world's top six working billionaires were (in ascending order): media magnate Rupert Murdoch (net worth $5.3 billion); business tycoon Francois Pinault (net worth $6.6 billion); computer software owner Hasso Plattner (net worth $6.9 billion); oil, gas and real estate owner Philip F. Anscutz (net worth $8.8.billion); investor Prince Alwaleed bin Talal bin Abdulaziz (net worth $13.3 billion); and computer magnate Bill Gates (net worth $51 billion). A 1998 United Nations study noted that the combined income of these six men could wipe out poverty from the face of the earth and provide basic social services for the quarter of the world who live in severe need.
The top 358 billionaires are worth the combined income of 45%
of the planet's population, the 2.5 billion people on the bottom.
"The only effectual weapons are the facts, figures and arguments
that discredit the corporate agenda and reveal progressive alternatives.
If they - and the means of disseminating them - continue to lie rusting from disuse.… it won't be long before the New World Order is here to stay."
- ED FINN
"Our tragedy lies in the richness of the available alternatives and the fact that so few of them are ever seriously explored."
- TOM ATHANASIOU on free trade and global poverty.
"I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that."
- LAWRENCE SUMMERS, chief economist of the World Bank, in an internal memo, 12th December 1991
THE HAVES AND THE HAVE-NOTS: THE NORTH-SOUTH DIVIDE
IN THE NORTH:
Live one quarter of the world's people who consume 80% of the world's resources and pump out 80% of the world's greenhouse gases
IN THE SOUTH:
Live three quarters of the world's people who consume just 20% of the world's resources with average incomes 18 times lower than those in the north
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