“If we appreciate the achievement of “beating” the G8 and the IFIs… this victory could be part of building serious momentum for the global justice movement as it moves toward the WTO meetings in Hong Kong and other key events. Unfortunately it appears that the G8 proposal will be perceived by many progressive campaigners as another defeat, albeit with some potentially positive aspects.”
(This report is in two parts. The first is a close reading of the G8 debt plan and some of the interpretations and proposals about the plan that have emerged since July. The second is an analysis of its implications.)
PART ONE: WHAT IS THE G8 TRYING TO SAY?
The G8’s proposal for debt cancellation, announced at the end of a Finance Ministers’ meeting on 11 June 2005 and reaffirmed in the summit communiqué of 8 July 2005, could be the most significant development in international debt policy in the last ten years.(1) Leaks from the IMF and World Bank now indicate that those institutions, along with non-G8 European governments, are bending the rules of interpretation to try to retain the power they hold over Southern countries’ economic policies. These efforts are opposed by the US and UK governments; the conflict over how the plan will be implemented is likely to be addressed, and possibly resolved, at the IMF/World Bank annual meetings on September 24-25 in Washington.
Civil society organizations have themselves had notably different interpretations of the G8 Finance Ministers’ statement and its implications. This report will attempt to clarify what the G8 has said and committed to, and look at some of the implications of the statement for debt campaigners. It will also attempt to analyze the reasons for the varying interpretations.
Two caveats on the analysis of the G8 statement: 1) The G8 (and its predecessor, the G7) has a history of not acting on its statements, so we should not confuse the words on paper with deeds not yet done – though we should also consider the impact of the words alone; 2) The G8 controls between 50 and 60 percent of the voting power on both the IMF and World Bank boards; its determinations generally become policy at those institutions. Nonetheless, what we have now is still a proposal, which will be discussed at the IMF/World Bank annual meetings in Washington, DC in late September. Fundamental proposals such as this one require an 85% majority to pass, so it could, technically, be blocked, and in fact a group of non-G8 European countries is threatening to do exactly that at the IMF. Indeed, it appears that one of the key strategies of those leading the rearguard actions to subvert the G8 proposal at the World Bank is to define any number of consequences of the proposal as ones constituting “fundamental change” to the International Development Association (IDA), the Bank’s division lending to low-income countries.
SUMMARY OF G8 PROPOSAL
The G8 has proposed 100% cancellation of IMF, World Bank, and African Development Bank debt for those countries that have completed the HIPC program (the Heavily Indebted Poor Countries debt scheme devised and administered by the IMF and World Bank since 1996). The total number of such countries at the time the proposal was made was 18: Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda, and Zamiba. Fourteen of them are in Africa and four in Latin America and the Caribbean (for the latter group, the proposal is flawed for not including debts to the Inter-American Development Bank). Another ten countries (Burundi, Cameroon, Chad, Congo-Kinshasa, Gambia, Guinea-Conakry, Guinea-Bissau, Malawi, Sierra Leone, São Tomé & Principe) are currently progressing through the HIPC program and would, according to the UK government and others, receive the same offer once they completed it. Ten additional countries (Central African Republic, Comoros, Congo-Brazzaville, Côte d’Ivoire, Laos, Liberia, Myanmar/Burma, Somalia, Sudan, Togo) are eligible to enter the HIPC program but have not yet done so. If they do, and they complete the program’s requirements, they would also get their multilateral debts cancelled.
This offer exceeded the expectations of many observing the process, as it went well beyond the formal proposal made by the UK, which did not include IMF debt, and would only have paid off ten years of debt servicing rather than cancelled debt stock. But criticism focused on the relatively small number of countries included and the plan’s grounding in the HIPC program as its organizing framework. HIPC has long been viewed by many civil society organizations as little more than a way to bribe countries to stay on the IMF/World Bank debt treadmill. Completion of the program requires a commitment to three to six years of devastating structural adjustment programs and close monitoring by the IMF. In recent years the World Bank and many donor countries have acknowledged HIPC’s failure to serve its stated purpose of making countries’ debts “sustainable.” If HIPC rules are not altered, very few additional countries will be added to the 38 now eligible. The UK’s Make Poverty History (MPH) campaign has estimated that at least 62 countries require debt cancellation if they are to have any chance of meeting the UN Millennium Development Goals.
The good news is that there are no conditions or requirements other than completing the HIPC program. For the 18 countries that have completed the HIPC program, that means, in essence, unconditional debt cancellation; for the 10 countries already involved in HIPC, it means no additional conditions beyond what they have already agreed to. The IMF and World Bank are now (August 2005) scrambling to find ways to change the G8’s plan; they want to make the cancellation “revocable” if countries do not continue to meet IMF/World Bank rules. They are using references to “good governance” and other seemingly innocuous hortatory phrases in the G8 document to re-insert themselves into the process after the G8, at long last, seemed to have taken explicit steps to sever the fate of some indebted countries from the long arm of the IMF and World Bank.
For the 18 countries that already meet the HIPC criteria, this proposal, if implemented fully, would mean more money left for national budgets, which often devote between 25 and 50 percent of revenues to debt payments. Should countries remain resolute in not taking out future IMF/World Bank policy-based loans, it would also mean liberation from debts the institutions have manipulated to impose economic policies that have devastated these countries for up to 25 years. This new concession by the G8 could be the beginning of policy sovereignty and economic democracy for these countries.
But for many countries in need of comprehensive debt cancellation, this plan offers nothing. Some analysts have concluded that the plan would cancel about 10% of the debt that needs to be eliminated, according to MPH statistics. This figure has little real-world meaning, however: for the countries in question, it is either 100% of multilateral debt or zero. And the potential benefits of the plan cannot be measured solely by percentages or dollar amounts, since the political benefits of being freed from foreign domination are not reducible to numbers.
THE ACTUAL STATEMENT
The G8 Finance Ministers’ communiqué of 11 June comes in two parts. It should be remembered that the meeting at which it was issued was not planned solely to discuss debt, but to discuss broader questions of development. The first part of the communiqué is a general statement on the broader subject at hand, including vague assertions that ideas like a global tax on airplane fuel to fund development will be considered. The second part is the actual proposal on debt; it differs in tone from most such communiqués in that it talks of “commitments” and outlines a program in some specificity.
The debt proposal should therefore be seen as distinct from the main part of the communiqué, which is filled with disconcerting tributes to the power of liberalization, privatization, and market forces. The second section is, in fact, referred to in the general statement (point 7) as an annex. After disingenuously patting themselves on the back for the dubious success of the HIPC program, they write: “However we recognise that more still needs to be done and we have agreed the attached proposal. We call upon all shareholders to support these proposals which we will put to the Annual Meetings of the IMF, World Bank and African Development Bank.”
Below we look at the complete text of the proposal, which runs to just one page, and offer some interpretative commentary, section by section:
(Note: the official text is italicized and highlighted in red; both are indicated here simply by “quotation marks”)
“G8 PROPOSALS FOR HIPC DEBT CANCELLATION
Donors agree to complete the process of debt relief for the Heavily Indebted Poor Countries by providing additional development resources which will provide significant support for countries’ efforts to reach the goals of the Millennium Declaration (MDGs), while ensuring that the financing capacity of the IFIs is not reduced. This will lead to 100 per cent debt cancellation of outstanding obligations of HIPCs to the IMF, World Bank and African Development Bank.”
COMMENT: The proposal is defined as an extension of the HIPC program. This is unfortunate, as it maintains the link between debt cancellation and the program’s insistence on strict adherence to “structural adjustment” policies for at least 3 years, as gauged by the IMF. To the degree that the new plan validates HIPC and, if implemented, encourages the 20 countries that could yet qualify for cancellation to follow HIPC rules more faithfully, this is a major drawback. The final sentence above, however, is encouragingly precise in stating that 100% of IMF, World Bank, and AfDB debt will be cancelled for eligible countries. This represents the first acceptance by the G7/G8 of the call for 100% multilateral debt cancellation that has been pushed since the Jubilee campaigns of the mid and late 1990s. The insistence on using the HIPC framework means the list of countries will be limited to 38, barring changes in eligibility criteria. A recently-leaked document from the World Bank, however, lists the following countries as ones which could qualify for HIPC in the next year: Haiti, Nepal, Kyrgyzstan, Eritrea, Sri Lanka, Bangladesh, Bhutan, and Tonga.
What is unexpectedly good here is that completion of the HIPC program is the sole criterion for qualifying for debt cancellation. Unless “governance” standards (see below) are formulated into conditions – which the anti-cancellation forces at the institutions are now arguing for — this means most countries will get debt cancelled without having to meet any additional economic policy conditions. For the 18 countries that have completed HIPC, there are no conditions left to fulfill, and for those who have already started the HIPC program and hope to qualify, there are no conditions beyond those they have already agreed to and started implementing.
“Additional donor contributions will be allocated to all IDA and AfDF recipients based on existing IDA and AfDF performance-based allocation systems. Such action will further assist their efforts to achieve the MDGs and ensure that assistance is based on country performance. We ask the World Bank and IMF to report to us on improvements on transparency on all sides and on the drive against corruption so as to ensure that all resources are used for poverty reduction. We believe that good governance, accountability and transparency are crucial to releasing the benefits of the debt cancellation. We commit to ensure this is reaffirmed in future bilateral and multilateral assistance to these countries.”
COMMENT: The first sentence basically means that the money donated by wealthy countries to compensate the institutions for the repayments they will forego is to be distributed to all of the countries funded by the respective institution (rather than just the countries getting debt cancelled). It also states that the controversial systems in place for determining allocations (the Country Performance and Institutional Assessment [CPIA] at the World Bank/IDA and its analog at the AfDB) will be used to allot the funds. [IDA is the International Development Association, the part of the World Bank that makes low-interest loans to the most impoverished countries; the African Development Fund (AfDF) is the African Development Bank’s equivalent of IDA.] While the fact that some countries not included in the plan would see their IDA funds boosted can be seen as positive (if one overlooks the fact that those funds are part of conditioned loans), the reliance on the perverse CPIA, while expected, is not good news.
The remainder of the paragraph is not entirely clear. It requests that the international financial institutions report to the G8 on transparency and corruption issues, though it appears that this refers to all recipients of IDA and AfDF funds – not just the 18 countries benefiting from the proposal. Given the G8 summit communiqué’s attention to the problem of rich countries tolerating, and even abetting, corporate corruption in developing countries, the reference to “on all sides” may even refer to wealthy countries and international institutions as well as developing countries. The last sentence suggests that future loans and grants – to the 18? to all developing countries? – will be conditioned on demonstrating corruption and democratic reforms. These sorts of rules, unfortunately, can become just as onerous as the customary economic requirements.
* Additional donor contributions will be allocated to all IDA and AfDF recipients based on existing IDA and AfDF performance-based allocation systems.
* 100 per cent IDA, AfDF and IMF debt stock relief for Completion Point HIPCs.”
COMMENT: This second point is crucial: the British proposal would have simply made debt service payments, and only for ten years. Debt stock cancellation means the debt is wiped out.
“* For IDA and AfDF debt, 100 per cent stock cancellation will be delivered by relieving post-Completion Point HIPCs that are on track with their programmes of repayment obligations and adjusting their gross assistance flows by the amount forgiven.”
COMMENT: The worrisome phrase here is “on track with their programmes of repayment obligations.” This suggests that one requirement to qualify for debt cancellation will be that the country has not fallen behind in debt servicing to any creditor since completing HIPC. None of the proposal’s first 18 beneficiaries are in danger of being excluded on these grounds. Recent leaks from the IMF and World Bank suggest that they would like to twist this phrase to mean that benefiting countries should be subjected to on-going conditions. The World Bank, in particular, in a PowerPoint presentation for the Board of Executive Directors (“G8 Debt Relief Proposal: Preliminary Estimates and Issues”) by Geoffrey Lamb, a World Bank Vice President, quotes the phrase “on-track with their programmes” and poses the question: “Does this mean conditionality?” [“conditionality” is the World Bank’s obfuscating way of saying “conditions”]. Lamb conveniently truncates the phrase so that the term “repayment obligations” is omitted. Those obligations, of course, would be ended once the debt cancellation was effected, meaning no occasion for additional conditions – but only if you have the patience to read the whole sentence.
Also worrisome, for some, is the provision that aid flows from IDA and AfDB for individual countries would be reduced by the amount of debt cancellation. This gets into the “additionality” debate which divided Northern NGOs during the lobbying campaigns on this program. Some NGOs, including most of the larger ones, insisted that debt cancellation should not result in reduced aid flows, and in fact should mean a net increase. Others in the North viewed elimination of debt with no additional conditions as significantly more important than the maintenance of aid flows, especially when those aid flows represent highly-conditioned loans or grants from the international financial institutions. The UK proposal to the G8 reflected the pro-additionality position, while the US proposal mandated a proportional cut in aid for countries receiving debt cancellation. In this and other regards, the US position seems to have carried the day in the final G8 proposal. Jubilee South and other Southern-based progressive organizations, to the extent they involved themselves in the debate, were generally aligned with the position downplaying the importance of aid flows (see, for example, sign-on statement from African Social Forum, Lusaka, December 2004).
“Donors would provide additional contributions to IDA and AfDF, based on agreed burden shares, to offset dollar for dollar the foregone principal and interest repayments of the debt cancelled. Additional funds will be made available immediately to cover the full costs during the IDA-14 and AfDF-10 period. For the period after this, donors will commit to cover the full costs for the duration of the cancelled loans, by making contributions additional to regular replenishments of IDA and AfDF.
* The costs of fully covering IMF debt stock relief, without undermining the Fund’s financing capacity, should be met by the use of existing IMF resources. In situations where other existing and projected debt relief obligations cannot be met from the use of existing IMF resources (e.g. Somalia, Liberia, and Sudan), donors commit to provide the extra resources necessary. We will invite voluntary contributions, including from the oil-producing states, to a new trust fund to support poor countries facing commodity price and other exogenous shocks.
* Globally and on this basis we are committed to meeting the full costs to the IMF, World Bank and African Development Bank. We will provide on a fair burden share basis resources to cover difficult-to-forecast costs, in excess of existing resources, to the IMF, IDA and AfDF over the next three years. Subject to further analysis by the institutions we will provide up to $350-500 million for this purpose. We are also committed, on a fair burden share basis, to cover the costs of countries that may enter the HIPC process based on their end-2004 debt burdens. We will also seek equivalent contributions from other donors to ensure all costs are covered and we will not jeopardize the ability of these institutions to meet their obligations. Utilize [sic] appropriate grant financing as agreed to ensure that countries do not immediately re-accumulate unsustainable external debts, and are eased into new borrowing.
We call upon all shareholders to support these proposals which would be put to the Annual Meetings of the IMF, World Bank and African Development Bank by September.”
END OF STATEMENT
COMMENT: The most important thing in this final section is the repeated reference to “commitments” made by the G8 – unusually strong language for this group, which usually prefers vague pledges. Nonetheless, the fact that arrangements for the “financing” of the debt cancellation are left imprecise concerns some campaigners. This may not be unreasonable, since, as noted, the G8 has a poor track record in keeping its promises.
RECENT DEVELOPMENTS AT THE IMF & WORLD BANK
The documents leaking out of the World Bank indicate that it will argue that the G8 and other wealthy countries must make more substantial, binding financial commitments if the program is to be implemented as outlined. The most recent paper by Geoffrey Lamb at the World Bank (“The G8 Debt Relief Proposal: Assessment of Costs, Implementation Issues and Financing Options,” co-authored with Danny Leipziger and dated 6 September 2005) in fact argues that the best solution would be for the donor countries to provide cash now to cover full compensation for the debts to be cancelled – funds that would have fallen due over the next 40 years. Failing that, the Bank suggests that the donor countries provide legally-binding promissory notes. Anything less, argue Lamb and Leipziger, would mean that the Bank’s board should view the debt deal as mandating a “fundamental change” to IDA, a legal term that triggers a requirement that the facility’s articles of agreement be amended, a long process that requires an 85% super-majority vote. That process would make the deal vulnerable to the already-announced objections of non-G8 European countries such as Belgium and Norway to the program. Because European countries are greatly over-represented in the board’s voting allocations, this exposes the deal to the real prospect that it could fail despite the G8’s support – almost certainly an unprecedented situation. The fact that certain members of the G8 – France, Japan, and Germany in particular – have demonstrated uneasiness with the agreement they made increases the risk.
The Lamb-Leipziger paper from the World Bank and proposals made by some European directors at the IMF advocate that on-going conditions be attached to the cancellation, in part to limit the amount of cancellation that would have to be “financed” (i.e., some countries would disqualify themselves by failing to meet conditions). The greater motivation for such proposals, however, is certainly the institutions’ interest in perpetuating the power they wield over the economies of Southern countries. Their unflinchingly arrogant attachment to controlling countries’ economic policy-making, is, as always, remarkable.
Until the World Bank has the full amount, dollar-for-dollar, that cancellation will “cost” it in its own accounts, it will continue to wail that it cannot afford to cancel the debt. The Bank in fact has entire departments devoted permanently to pressing donor countries for more funding with the argument that it is under-funded.
The IMF and the World Bank are tremendously wealthy institutions. Repeated studies have shown they can cancel the debt of over 20 countries outright with no effect on their programs. And would many people argue that the positive impact of debt cancellation, so widely hailed now by the leaders of the G8 countries, would not justify some rearrangement of priorities – perhaps subsidizing one less oil pipeline through the rainforests for the world’s most profitable companies — if that were required?
Whether campaigns emphasize the illegitimacy of these debts or the fact that they are the biggest obstacle to development in dozens of countries, there should be no question that canceling them should be the highest priority. Now that the US and UK have been forced to adopt, to some extent, this position, we must defend what is positive in the G8 proposal, including the commitment it makes to deal with the question of resources. How the institutions and the governments that control them want to balance their books is their business, not ours. We should not take on the responsibility of locating funds to maintain the health of an international financial system whose injustices we have exposed so well.
Some civil society advocates of “additionality” may object to this perspective. It will be their burden to explain why getting more new World Bank loans or grants is more important than having IMF, World Bank, and African Development Bank debt eliminated.
More fundamentally, the G8 debt proposal has exposed the dedication of the institutions’ staff, and many of the donor countries, to continuing to use the IMF and World Bank as instruments to perpetuate the unjust global economic system, and the key role played by the manipulation of international debt in making that possible. The desperation that characterizes many of these maneuvers is a gauge of the significance of the challenge posed by the G8 proposal to the status quo. The proposal itself, for all its manifest shortcomings, is unprecedented, as it represents the success of years of campaigning by civil society groups — campaigning that has finally forced the two governments most identified with establishing and maintaining the structures of global inequality, the United States and the United Kingdom, to call for a break with the systematic crippling and domination of weaker countries’ economies. It applies to far too few countries, and is cast as the culmination of a heavily-conditioned HIPC program, but the precedent of at last providing for the release of 18, and as many as 38, countries from the cycle of debt domination is one that must be preserved and expanded upon. It is the establishment of this precedent that the staffs of the IMF and World Bank and the representatives of governments accustomed to being seen as more generous and reasonable than the US and UK – the Scandinavians, the Dutch, the Belgians – are trying to block. Never have we come so close to forcing this kind of break, and never has the hypocrisy and lust for power that undergirds the system been more vividly on display.
(1) The Finance Ministers’ statement, rather than the G8 summit communiqué, is the authoritative document. The summit communiqué’s reference to debt reads: “The G8 has agreed a proposal to cancel 100% of outstanding debts of eligible Heavily Indebted Poor Countries to the IMF, IDA, and African Development Fund, and to provide additional resources to ensure that the financing capacity of the IFIs is not reduced, as set out in the statement of 11 June.” (point 29, page 27, “Africa” section).
PART TWO: WHAT DOES IT ALL MEAN? WHAT IS TO BE DONE?
RESPONSES FROM DEBT CAMPAIGNERS
Most of the responses to the G8 debt proposal from campaigners, with the exception of the enthusiastic roars coming from Bob Geldof and Bono, have characterized it as disappointing – or, to use Christian Aid’s formulation for the G8 summit as a whole, “vastly disappointing.”
Measured against what campaigners were demanding – in most cases 100% multilateral debt cancellation for 62 countries without conditions – the G8 proposal certainly did fall short. Any response would have to highlight the amount left undone. Many reactions adopted an indignant, even angry tone:
* Jubilee South: “The multilateral debt cancellation being proposed is still clearly tied to compliance with conditionalities which exacerbate poverty, open our countries further for exploitation and plunder, and perpetuate the domination of the South. […] Even if the debt cancellation were without conditionalities, the proposal falls far too short in terms of coverage and amounts to demonstrate a bold step towards justice by any standard.”
* George Monbiot, Guardian (UK) columnist: “Anyone with a grasp of development politics who had read and understood the ministers’ statement could see that the conditions it contains – enforced liberalisation and privatisation — are as onerous as the debts it relieves.”
* Demba Moussa Dembele, director of Forum for African Alternatives (Senegal): “At the moment this is nothing but a promise. […] Therefore we will wait to see how this decision is put into action and with what conditions. Caution is necessary also because the ‘creditor’ countries are longtime masters of the arts of duplicity, manipuliation, and concealment.”
* Jayati Ghosh, coordinator of IDEAS (India): “[E]ven otherwise well-informed and progressive people in the developing world were fooled into thinking that, for a change, the leaders of the core capitalist countries were actually thinking about doing some good for people desperately in need of it. […] The G8 debt relief deal is actually a paltry and niggardly reduction […]. And this pathetic amount is being traded for yet more major concession made by the debtor countries, in terms of sweeping and extensive privatisation of public services and utilities, which is about all that is left for governments to sell in these countries, as well as large increases in indirect taxes which fall disproportionately on the poor.”
* Oxfam (UK): “Oxfam welcomed the Finance Ministers’ agreement but said it did not go far enough, only covering between 10 and 20 per cent of what’s required and not extending to all the countries that need it.”
* John Hilary of War on Want (UK): “The G8 has given less than 10% of our demand on debt cancellation and not even a fifth of what we called for on aid.”
* Richard Bennett of Make Poverty History (UK): “A small minority of the world’s poorest countries will have significant debt cancellation if this deal is agreed. This is a step forward, as we have publicly acknowledged, but does not even come close to ending the debt crisis.”
* Alex Wilks, coordinator of the European Network on Debt & Development (EURODAD): “In actual fact, the official plan may only write off 10% of low-income country debt. Not a penny more. The G8 proposals are a step forward, but will by no means resolve the developing country debt crisis.”
* Collective statement of 19 major African NGOs, also endorsed by nine international NGOs: “The debt package provides only 10% of the relief required and affects only one-third of the countries that need it. […] both packages [debt and aid] are still attached to harmful policy conditionality.”
* The Committee for the Cancellation of Third World Debt (CADTM, based in Belgium): “The creditors’ hold on those countries’ [the 18 HIPC graduates] economies is extremely strong, and the G8 ministers merely proposed some debt relief and intended to reinforce conditionalities linked to new loans.”
* African Network & Forum on Debt & Development (AFRODAD, based in Zimbabwe): “The recent solutions offered by the G8 for the Debt crisis in poor countries are nothing short of the continuation of the chains of slavery and bondage for the citizens in those countries. […] they are just raising people’s hopes unnecessarily as the world waits to see the devil in the details. […]The deal only represents one eighth of what Africa needs in terms of debt cancellation, as this means canceling only US $40 billion out of Africa’s burgeoning debt stock of over US$330 billion. The agreement does not address the real global power imbalances but rather reinforces global apartheid.”
* John Pilger, syndicated columnist & film-maker: “The truth is that the debt relief the G8 is offering is lethal. Its ruthless “conditionalities” of captive economies far outweigh any tenuous benefit.” And elsewhere: “it says that debt relief to poor countries will be granted only if they are shown `adjusting their gross assistance flows by the amount given’: in other words, their aid will be reduced by the same amount as the debt relief. So they gain nothing.”
Many of these responses were directed nearly as much to the perceived hyperbolic descriptions of the deal in the mainstream media, especially in the UK, the site of the G8 summit, and by UK officials like Gordon Brown. Many of the columns, articles, and statements responding to the debt proposal are motivated, often explicitly, by the concern that many people will believe the campaign has completely succeeded, and so there is no further need to pay attention to development issues.
The sensationalized treatment of the deal was, in part, a consequence of the success of the Make Poverty History campaign in capturing media attention in the weeks and months before the summit. Many in MPH campaign would probably argue that its success was in fact taken too far by the celebrity power of rock stars Bob Geldof and Bono, who were treated as campaign spokespeople, despite the absence of any official connection. Once debt, aid, and trade became identified with celebrities, any hope of sophisticated analysis in the media was sacrificed.
Not everyone’s experience of the news was like that of people in the UK, however. Those reading the opinions of debt campaigners or the alternative/left press (right up to the “Guardian” and “New Statesman” in the UK) certainly got a more sober viewpoint. In Kenya and other African countries, it was virtually impossible to keep track of all the opinion articles scorning the offer of debt cancellation, blaming poor leadership for the continent’s economic crises, and concluding that Africans should not rely on charity from the North, for only Africans can rescue Africa.
It is, no doubt, good for activists pressing for an end to rampant injustice to gauge developments against what should be, rather than simply against what is perceived as practically possible. But is that enough? Is it not necessary for activists to also engage in hard-headed analysis informed by strategic and political realities?
Should we be judging our success, or the progress made on debt cancellation, on the basis of whether the G8 leaders admit they’ve been wrong to design all their policies to benefit wealthy investors and corporations, even when it means increased poverty? What are the real chances that they would do anything of the sort, given that they have never in the last 10 years, and probably much longer, said anything that suggested an inclination to question the wisdom of the dominant neo-liberal economic paradigm? The leaders’ individual power, and the power of their countries and corporations, is rooted in that system; attaining an explicit rejection of it from the G8 is a long-term aspiration at best.
The G8 is an exclusive, illegitimate club of the people running the world, with no official legal status and thus accountable to no one. With a varying degree of democratic constraints, these people control a dominant portion of the world’s money and military force. However much success activists may have in building a “movement,” we remain far from being the sort of force that can determine the G8’s positions. Whatever lip service the G8 leaders may pay to activists’ demands, their actions are politically determined, and ordinarily prioritize the interests of their most influential constituencies – the business sector and the wealthy individuals who can fund political parties. Any time they depart from those priorities, we should look at what political forces are making that happen.
We should, then, look at the results of G8 summit not with the expectation that we will secure all our demands, but always with an expectation that the politicians will try to neutralize whatever noise we’ve been able to make, and then continue serving their usual constituencies, though perhaps glossing the news with some high-minded rhetoric. Until we have assembled a much stronger global force – one that has real political leverage — we should not delude ourselves that the G8 is going to become an ally.
We also must not fall into the trap of evaluating our work as debt activists solely on the basis of what the G8 says or does. Advocacy aimed at the G8 is just one of our tools. Our overall strategy must take whatever comes out of the G8 and use it, if possible, to augment other tactics. The momentum this G8 plan could give to repudiation campaigns, for instance, is a major opportunity; recognizing that requires refusing to take what the G8 says as the last word on what debt campaigners can do.
If the most serious analyses of the G8 proposal just explain how it failed to meet the movement’s demands, we are failing to look at what has been gained and how, and we are failing to plot a strategy for exploiting the new situation so as to attain more of those demands in the near future. Yes, the critiques of the G8 deal are, in most respects, correct; but it is at least as accurate to say that, even if the promises are not kept, this is the biggest success debt campaigners have had. It puts the G8 on the record as supporting the logic and need for 100% elimination of multilateral debt, and as implicitly acknowledging that the HIPC debt scheme has failed and, by extension, that the impact of the corporate-globalized economy is unsustainable, at least in some places. These are very valuable statements (or, in the latter example, logical extrapolations). Yes, they apply to far too few countries at the moment, but they will serve as the bulwark of ongoing debt campaigns as we struggle to expand this victory.
And, if the pledges are kept, it will mean 100% multilateral debt cancellation for 14 African countries, and substantial multilateral debt cancellation for four Latin American countries (the exclusion of the Inter-American Development Bank from the deal means it is less impressive in Latin America). And that cancellation is, if the deal is read literally, to take place without additional conditions. Dismissing a development which might very well have considerable tangible benefits for the most vulnerable people in these countries risks compromising our credibility with them and other observers.
The promises of the G8 Finance Ministers’ statement alone substantially change the context faced by campaigners in Northern, and especially G8, countries. Should they become reality, they will shift the field of play for all campaigners. To downplay or ignore these facts in civil society responses to the plan was not only inaccurate, but risks scuttling entirely the campaigning momentum that had built up before the summit.
Activists should recognize that they have, after years of campaigning, but still against the odds, had a real impact on the G8. We are, for the moment at least, “players” in global politics. The strategic response is to consider what actions we can take while we have this status in order to expand our impact. Viewed this way, the G8 plan should be seen not as business-as-usual, but an opportunity to continue acting – and not only in terms of advocacy aimed at Northern institutions and governments. If we act, we may be able to change things more; if we focus our efforts on critiques, we take ourselves out of the game.
AN EMPIRICAL GAUGE OF THE IMPACT OF THE G8 PLAN
As outlined in the earlier analysis of the G8 statement, there are moves afoot within both the IMF and World Bank to subvert the G8’s plan. Non-G8 European directors at the IMF are threatening to block the program unless they are able to impose the same devastating conditions they always have. At the World Bank, senior management is busily misinterpreting the G8 statement and finding artful ways to re-institute conditions.
These unusual maneuvers in both institutions are perhaps the best evidence that the G8 statement really does signal a break with debt policy as it has been practiced until now; it is a significant threat to business-as-usual. The assumption by many commentators that the plan, as outlined, really does include ongoing conditions is contradicted by these desperate attempts to re-attach the conditions.
These rear-guard measures may succeed, especially because some of the G8 countries – France, Japan and Germany in particular – were apparently dragged along with the proposal despite serious reservations. What is disconcerting is that the responses from civil society leaders, meant by many to prevent demobilization of the activist community, may have the paradoxical effect of discouraging those activists from acting to preserve the gains represented in the G8 plan. Why should they fight for a plan dismissed as negligible or a vehicle for re-imposing IMF conditions? If this turns out to be our present reality, we will have fallen into the trap of wallowing in our familiar state of going from failure to failure, when a more active interpretation could have energized our activists with a success and prodded them to active engagement to preserve, and maybe improve or expand, the victory.
THE MEANING OF THE DEAL FOR MOST SOUTHERN COUNTRIES
In Kenya it became clear that even in a country that was excluded from the deal, the results can be positive. A prominent cabinet member denounced the G8 for excluding Kenya, not once but nearly daily for a week, often on national television. Two members of Parliament advocated repudiation or a suspension of payments. These developments, and a recognition that the terms of this plan likely exclude the possibility of one that will benefit Kenya in the near future, have caused Kenyan campaigners to see an opening to argue for full repudiation. They are now building a campaign around this demand of their government – arguably the strongest demand Southern campaigners can make. Instead of asking leaders of rich countries to grant cancellation, they are demanding genuine accountability from governments that are too often accountable chiefly to their donors.
For campaigners in Southern countries, outside the 18 beneficiaries, the most significant impact of this proposal may not be the precedent set by the G8, but the impetus it gives to campaigns for more radical solutions. In the final analysis, it is only when power relations are transformed that debt and other economic justice campaigns can be considered won, so moving closer to empowering citizens and governments in the South is ultimately more important than deducing what more can be achieved with the G8. This is not to trivialize the work of Northern campaigners, who should keep pressuring their governments and the IFIs, but rather an acknowledgement that liberation can only come from within the countries being oppressed. Northern campaigners should be urging their governments NOT to collect the debt.
In this regard, it is potentially significant that between the 11 June announcement and the G8 summit, the African heads of state decided at a meeting of the African Union in Sirte, Libya, to call for comprehensive debt cancellation for the entire continent – the first such unified call. At least two presidents of benefiting countries, Abdoulaye Wade of Senegal and John Kufuor of Ghana, responded to the deal by saying it would only have real meaning in the context of continent-wide cancellation. Activists now have the opportunity to use these statements to pressure their governments to repudiate, or at least demand a much better deal.
The example of Nigeria is fresh in people’s minds: when the lower house of the federal legislature called for repudiation of the entire external debt, and President Olusegun Obasanjo demurred but said it may come to that, the country’s bilateral creditors instantly became significantly more willing to make a deal at the Paris Club. The merits of the deal Nigeria got in June 2005 are the subject of fierce debate, but the important thing for campaigners is the successful deployment of a credible threat of repudiation, which can be held up to other countries. Another lesson from Nigeria may well concern the dangers of a top-down campaign: since the pressure for repudiation came largely from legislators, once they are satisfied with a deal, the pressure can easily disappear. But one of the civil society campaigners, Justice Egware of the Civil Society Action Coalition on Education for All in Nigeria, drew the logical conclusion from the G8 Summit, saying, “The message from Gleneagles is clear to us in Africa. We will intensify our call to our governments that have not secured debt cancellation to strongly consider repudiating unjust and odious external debt.”
Debt and economic justice campaigners in Africa and other parts of the Global South have a network called Jubilee South, which has recently opened an Africa secretariat in Kenya (with which the author is associated). If the repudiation campaign takes off in Kenya, Jubilee South will be well-positioned to encourage other campaigns to adopt the strategy. A strong demand for repudiation from many countries could be substantially more powerful than one restricted to a single country.
OF GRATITUDE AND POLITICS
Another concern of some of the critics of the G8 plan seems to be that if campaigners do anything other than criticize it, they will be seen as “approving of,” “grateful to,” or “working with” the G8. This reductive view of political activism is unwarranted. Acknowledging the ways in which the G8 debt plan is a victory in no way obligates us to express gratitude to governments for taking actions that should never have been necessary in the first place, nor to lose sight of the fact that the G8 and the IFIs remain very much the enemies of social and economic justice. What such a viewpoint implies is simply that we activists are achieving something – forcing the G8 and the IFIs to take steps most of them do not want to take. That’s politics.
If we appreciate the achievement of “beating” the G8 and the IFIs in this case, this victory could be part of building serious momentum for the global justice movement as it moves toward the WTO meetings in Hong Kong and other key events. Unfortunately it appears that the G8 proposal will be perceived by many progressive campaigners as another defeat, albeit with some potentially positive aspects.
In a similar vein, many campaigners refused, in the year before the G8 summit in Scotland, to take the US debt proposal to the G8 seriously, on the grounds that the Bush Administration is deceptive, motivated only by self-interest, and wantonly unilateralist. All true, of course, but to extrapolate from those truths to viewing everything the US government says as simply a trap is to misunderstand politics and the strategic openings it can provide. As criminal as many of the Bush Administration’s actions are, it must be acknowledged that it is the most radical administration the US, and perhaps any G8 country, has seen in modern times. It is willing to overturn precedents, disregard international norms, and break with tradition. In most cases this has been destructive, but when applied to a system as corrupt as the one managed by the IMF, World Bank, and G8, it can generate opportunities. Again, there is no reason to express solidarity with the Bush Administration, but there is ample reason for activists to identify and exploit the existing political openings, including the tensions among G8 governments.
European campaigners’ dismissal of the US proposal – which called for 100% multilateral cancellation, apparently unconditional, for 41 countries, using the resources of the IFIs – and their virtual endorsement of the British proposal – which called for paying the debt service for ten years of about 25 countries that met strict conditions, using new donations from wealthy countries – could have given the G8 a green light to adopt a plan like the UK’s. Such a plan, which probably would not have had US participation, would have been far worse in almost every respect than what was achieved. Yet the British government was allowed to label it “100% debt cancellation” – a transparently dishonest claim – without organizations questioning them for several months. This put several large mainstream organizations in the UK in the uncomfortable position of having supported a proposal substantially less progressive than what the G8 ultimately approved.
Fortunately, some British organizations began challenging the UK proposal in the weeks just before the G8 Finance Ministers’ meeting. Also fortunate – though only in this one case – was the fact that the US wields the most power within the G8, and the Bush Administration likes to use it. Just as any reasonable statement on climate change at the summit was scuttled by the US, so the final result on debt ended up looking more like the US proposal than the UK’s – despite the insistence of campaigners in the UK, France, and elsewhere that such a result was impossible.
Another factor encouraging European groups to favor the UK proposal was the “additionality” question. This was a clear case of “moving the goalposts” from the Jubilee demands: no longer was 100% unconditional debt cancellation sufficient – the demand now was that benefiting countries realize a net increase in revenue flows as a result of cancellation. This position, adopted by most UK groups, largely de-politicized debt. Instead of being about power relations, instead of freedom from debt meaning policy sovereignty, everything came down to adding up the numbers. Even John Pilger, a commentator known for seeing the political meaning of economic decisions, fell into this trap in the passage quoted above. That this position became conventional wisdom throughout Europe (while hardly infecting North America at all), to the extent that one of its advocates claimed that “Jubilee 2000 was always about increasing revenue flows,” and a draft position paper declared that a deal for debt cancellation without additionality was “worse than no deal at all,” is nothing short of astonishing. The virus that apparently swept across Europe made campaigning organizations the allies of the World Bank and IMF in discounting the politics of economic domination, and in some cases even had people prioritizing the preservation of IMF and World Bank loans (and the domination, and new debt, that goes with them) over the emancipation of countries from debt and from the continuing devastation of structural adjustment imposed by outsiders using the weapon of debt.
Debt is a political instrument, one that traps countries in the snare of conditions and never lets go, subjecting millions to national policies that must please corporate interests before addressing their own. It’s uncertain whether this new deal from the G8 will actually liberate countries from that insidious arrangement, but there can be no doubt that it will do more to move them toward liberation than new aid money will (especially if it comes from the World Bank or IMF!). Even for those who prefer to live in a political vacuum, it is widely agreed that debt cancellation is the most effective way to mobilize funds for developing countries.
Many Northern groups found themselves lobbying their governments not on the provisions of the final debt program, but rather on how it would be “financed.” This is another manifestation of the logic of “additionality”: campaigners taking on the assumption that it is important to preserve the financial health of the World Bank and IMF, so that they can continue to make loans for destructive projects and in support of devastating economic conditions.
When it appeared that the plan might die altogether because of disagreements over how to compensate the institutions for the payments they would no longer be able to count on, even those opposed to discussing financing could not argue against the strategic logic of promoting financing plans. But now that the G8 plan has been formalized, the institutions and even some campaign organizations are expressing concerns that the financing mechanisms are not substantial enough.
We should resist playing into the IMF and World Bank’s hands by attaching any legitimacy to their ostensible concerns regarding financing. The G8 took the unusual step of “committing” to the debt cancellation, and (alas) to compensating the IFIs. If we are serious about our position that the debts are illegitimate, and if we accept that nothing is more important for development than debt cancellation, then we should say that taking the most effective step for the development of the most impoverished countries should take priority over any other development agenda. The IMF and World Bank have billions of dollars at their disposal; they have no excuse for not canceling the debts that have paralyzed whole continents. These institutions know that private banks regularly write off bad loans, which means that they have to figure out how to do without the previously-anticipated income. The IFIs can do the same. Engaging in coming up with ways to find the funds to balance those institutions’ books should be distasteful to us, especially if we believe that a financially healthy IMF and World Bank are greater dangers than a few unemployed economists in Washington, DC.
THE POLICY SUPPORT INSTRUMENT
The ominous undercurrent during all the discussions leading up to the G8 plan has been the suggestion that the IMF should create a new “facility” that would allow it to continue imposing conditions on countries even when it is lending no money. This looks very much like a way to ensure continued IMF domination of countries even after they have their debt to the IMF cancelled, or after they take a sovereign decision to avoid the IMF. Getting a “pass” from such a facility could become a condition of getting any other assistance, investment, or trade deal.
Now the IMF is going public with the plan, called the Policy Support Instrument (PSI). Its test case is Nigeria, in conjunction with its Paris Club deal: to reassure the Paris Club, which normally requires a country to be under and IMF plan to negotiate with it, Nigeria will be formally “monitored” by the IMF despite taking no loans from the institution.
The PSI has the potential of mitigating or eliminating the political benefits of debt cancellation. As it is considered by the IMF board, campaigners will need to organize serious pressure to prevent its approval, or at least to limit its scope.
THE FINAL WORD
Economic justice won an incomplete but real victory on June 11th. Let’s work to extend it rather than find ways to pronounce it a defeat.
* Soren Ambrose is with the Solidarity Africa Network in Action (Nairobi, Kenya) & 50 Years Is Enough: US Network for Global Economic Justice (Washington, DC, USA) August/September 2005. [email protected]
Note: Solidarity Africa Network in Action calls for 100% multilateral and bilateral debt cancellation without externally imposed conditions. The Network advocates for the active participation of people in designing and implementing economic and other kinds of policies that affect them. We believe that this requires the elimination of the debts used to constrain public space for decision-making, and the eradication of the influence of international financial institutions (IFIs) on policy-making. The Network recognizes debt as a tool of control and domination and its resolution as a moral and human rights imperative.