Home > Development, International, Money Matters, Zimbabwe > Third World debt, the poor suffer in silence

Third World debt, the poor suffer in silence

English: The Obverse of the 2009 Zimbabwe $100...

English: The Obverse of the 2009 Zimbabwe $100 trillion banknote. (Photo credit: Wikipedia)

The one who knows how is always at the mercy of the one who knows why. The third world has always been at the mercy of the first because the third world has lagged behind the West, following and imitating like a little brother seeking the approval of the older brother. Over the centuries Africa in particular has provided manual labour for the development of the West. The West knows why and the Africa knows to roll sleeves and get up to some serious work. Those who know why sit in their big corner offices with magnificent views making decisions, why, when, who and how. They sip expensive wines and smoke expensive cigars. They instruct those who know how to begin work and this is where the real work begins, the grueling, taxing work of digging trenches, lifting, carrying, pulling shoving getting the real work done. For all their labour, they get a miserly pay check at the end of the week, just enough to put food on the table. At the end of the day they retire on their worn out bed, too tired to feel the springs poking through the mattress. In the mean time, those who know why are dining in their fine suits, sipping French Champaign.

3.5 Billion People, out of 5.6 Billion share 5.6% of the world economy!

The richest 10% of the world consume more than 60% of the world’s resources!

This situation repeats itself generation after generation. History tells of able bodied men being shipped from to the North to build infrastructure and provide manual labour that build the great economies of the North. While the poor supported, industrialized and developed the First World, the solvency of the poor was crushed underfoot. Not only were able bodied men in their prime taken to develop the 1st world, cheap raw materials were sourced from the third world and taken to develop the 1st world. As a result, the development in the 3rd world was retarded and stunted beyond repair. Another hiccup for the third world was colonialism; a classic example is how Chief Lobengula sold Zimbabwe for a bag of sugar. Having tasted sugar and its sweetness, he ignorantly signed away his land in a contract that would be null and void in today’s legal systems. Unfortunately, being at the mercy of those who know why, the 3rd world has never been able to undo the injustices that have been thrown its way.  The bullies of the North have intimidated and manipulated the ignorant poor and forced them into submission.

The story has not changed; the North still bullies and manipulates the third world. They throw tokens that just barely pacify the communities while raking in all the profits. The poor do not have a voice; they just take what is thrown at them. Presidents of these poor nations are stuck with a problem they alone cannot fix while their people expect them to perform miracles and make the problems go away. The problems of the third world are complex and cannot be solved in one single presidential term. There are too many odds against them, hunger, poverty, unemployment, ageing infrastructure and underperforming economies all demanding a solution.

The truth of the situation is that the North controls everything. The world economies are controlled by major financial institutions of the North such as the World Bank and the IMF. Prices of commodities are established in the North. The third world consumes while the North sets prices. The third world farms and mines while the North finishes products then sells them back to them. The free market is an illusion, another token, a fantasy that probably soothes the conscience of the rich North. The IMF and the World Bank are probably the worst enemies of the developing world, yet the developing world needs these institutions to provide credit for difficult times. These lines of credit come with strings attached; they have conditions and terms which further put a yoke on the countries making them sink further into debt and poverty. Is it not strange that the poor are always offered high interest loans when the rich are given favorable rates with good incentives for them to borrow?

The financial houses of the North have also made sure that there is no debt cancelation. Unlike humans countries cannot file for bankruptcy. People and legal entities, companies are allowed to file for bankruptcy allowing them to wipe their slate clean and start afresh. This is such a great concept, but unfortunately countries cannot do this because they would emerge debt free, owing the major financial houses nothing.  In 1980 3rd world debt stood at $600 Billion and by 2001 repayments of $4.5 Trillion had been made, 6.5 times the borrowed amount. One would think that the debt would have been paid off, but the outstanding debt still stands at around $2.45 trillion! This is still more than 4 times the original debt. Surely is it not fair to conclude that this is daylight robbery. Robbing from the poor third world countries and their citizens, yet these are the people that need all the financial assistance they can get.

South Africa is a real life example of the burden of loans on Africa:

  • South Africa spends 12% of its national budget servicing loans.
  • It costs about R50 Billion a year to service debt.
  • SA has spent more than R500 Billion since 1994, (its independence) on loans.

 Most African nations are bankrupt, but they are required to continue to pay these escalating debts. If however bankrupt countries were allowed to file for bankruptcy, the majority of Africa would have filed for bankruptcy and would start afresh on a clean slate. The North controls poor countries by loaning them money and taking back payments at astronomical levels. I experienced this first hand when Zimbabwe adopted the first Structural adjustment programme, ESAP. Anybody my age and older will realize that this was the time that Zimbabwe started on a downward trend. Africa is already burdened with so many challenges without having to adopt reforms that are designed to bring even more challenges.

The facts about the loans are as follows:

  • 1st world economies consume the majority of the world’s capital loans.
  • 1st world loans are used productively to develop that world and to accumulate profit.
  • 3rd world loans are used to arrest development and shackle its economies to the 1st world because of the stringent conditions attached to these loans.

 

When 1st world financiers are asked to wipe out third world debt, they are not losing anything because the original loans have been paid in full already.

By the 1980’s many African countries were bankrupt. World Bank and IMF rules state that a country cannot claim bankruptcy, so countries keep paying, using more IMF and World Bank loans which come with structural adjustment programmes.

The results of these adjustment programmes are:

  • Currency is devalued
  • Interest rates rise
  • Social Service spending is reduced or withdrawn
  • Subsidies are withdrawn
  • Workers are retrenched
  • Trade and industry are exposed to foreign competition.
  • This results in massive unemployment, poverty, massive damage to domestic production and trade.

Zimbabwe is an example of the negative impact of these programmes. In the early 1980’s soon after independence the Zimbabwean currency was at par with the British pound, or a bit stronger. In 1999, the Zimbabwean dollar was around Z$10 to the British pound. This was after some structural adjustment programmes. By 2008 Zimbabwe had hyper inflation and every person in the country was a billionaire, pound was worth millions of Zimbabwean dollars. Poor decisions made by policy makers coupled with structural adjustment programmes from the IMF and World Bank proved to be a cocktail of disaster.

Bono is right in calling for debt cancellation. The third world has paid its dues. If the first world is serious about wiping out poverty, then there should be serious moves towards cancellation of debt. Maybe wiping off debt will give corrupt governments more room to be corrupt, but innocent citizens of poor nations are the ones who bear the brunt of these heavy debt burdens. There is no reason for children to die of hunger, of waterborne diseases; this in a nutshell is equal to murder. If we watched a child die in our face without responding, the world would consider this to be manslaughter or another offense of that nature. The world watches as the helpless die, and this is not considered murder. When the world can watch children, the aged die without batting an eyelid, can we not call this cold blooded murder?

 

 

 

 

 

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  1. September 13, 2012 at 10:19 am | #1
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