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Cancelling Poor Countries' Debts: An Interview with Nick Dearden

Think Africa Press talks to the Director of the Jubilee Debt Campaign.
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The Jubilee Debt Campaign is the successor to Jubilee 2000 which sought to mark the new millennium with debt cancellation. Jubilee 2000’s defining moment was the mobilisation of 70,000 debt campaigners in Birmingham in May 1998 at the G8 meeting. The campaign was deemed highly influential in moving debt relief for developing countries onto the international agenda and keeping it there.

In recent years, the Jubilee Debt Campaign has run a number of effective and high profile campaigns, including Cut the Strings in opposition to the conditions attached to debt relief, and End Britain’s Dodgy Deals against debts owed to the UK from deals with dictators. Most recently, the Jubilee Debt Campaign received attention for their central role in the passing of the Debt Relief (Developing Countries) Act which severely restricts “vulture funds” in the UK (vulture funds seek to profit by buying debts of heavily indebted countries at decreased prices, before trying to recover the full amount, often by suing through in courts).

Think Africa Press spoke to the Director of Jubilee Debt Campaign Nick Dearden about the nature of Third World debt, the role of aid, and the group’s campaigns to expose illegitimate debts in Africa.

TAP: When did Africa’s debts, built up since decolonisation, reach levels intolerable to the Jubilee movement?

ND: By the 1990s it was pretty apparent to most campaigners in Africa and the global south in general that there was no point in aid coming into their countries because ten times the amount was leaving their countries every year.

TAP: In interest?

ND: Largely in interest, which was ramped up in the early 1980s. Of course some were paying the capital as well, but by the mid-1990s many countries had repaid the initial amount they had borrowed many times over due to interest rates. So the debts had been repaid in a sense but the debt stock just kept on growing.

You see the same hole they couldn’t get out of in Southern Europe and Ireland today. They are unable to grow because they can’t invest any money in their economies, in health or education, due to the amount of money that is leaving the country in interest payments. This means countries contract and get poorer, meaning they are less able to pay this debt that is getting larger.

TAP: Jubilee Debt Campaign doesn’t campaign against all debt, but what you term illegitimate debt. Can you define what you mean by “illegitimate”?

ND: We base our definition of “illegitimate” on definitions of odious debt. This means that it was lent to dictatorial regimes by creditors that could have known the money wouldn’t be spent on purposes beneficial to the people in that country.

Illegitimate debt is firstly odious – for example, that which is lent to a dictatorial regime to buy weapons or something non-beneficial. Secondly, it could have interest rates attached which are exorbitant. Thirdly, the loan could have unjust conditions applied to it – for example, a lot of money from the International Monetary Fund (IMF) is lent on the condition that the country will implement certain economic policies, such as privatisation or trade liberalisation. Fourthly, it could simply be illegal if the loan agreement violated local law or wasn’t signed off by the correct people – as was the case with Ecuador, who found that much of their debt was illegally contracted. Fifthly, it could be corrupt if there were kickbacks to agree the loan contract.

Debts need to be opened up to the people of the country so they can decide whether they believe those debts were legitimate or not.

TAP: Is there a case for illegitimacy even when the loan seems entirely above reproach but it is simply “unpayable”?

ND: Yes. We would say “unpayable” is a level of repayments that prevented a country realising the human rights of its people. Developing countries don’t have an obligation to international law to immediately ensure everyone is enjoying perfect health and education, but they do have an obligation to progressively improve the health and education of their people. If they can’t do that because of the level of debt repayment, we would regard that as a violation of human rights.

TAP: How many countries find themselves in these circumstances?

ND: Certainly all low income countries and a lot of middle income countries. We did research about five years ago which found that, in order to meet human rights obligations, around one hundred countries would need some level of debt cancellation.

TAP: Are current debt relief initiatives under the Highly Indebted Poor Countries (HIPC)initiative and the Multilateral Debt Relief Initiative (MDRI) helpful and sufficient?

ND: The HIPC initiative was established in 1996 and improved in 1998, and then the MDRI was signed in 2005 at the G8. About 40 very low-income countries are eligible for them. 32 have completed now and that has led to about $120 billion of debt being cancelled.

On the one hand, it’s definitely a step forward for those countries. Of those countries, about half show no signs of debt running up again and they have been able to increase spending on health, education and social welfare. There are statistics showing that Tanzania has doubled the number of teachers and therefore the number of children in school. Other countries have increased the number of nurses attending births which will have an impact on maternal mortality and childbirth mortality.

But there are serious problems. One is that only 40 countries are eligible and we have nearly got to the end of those countries. Many more countries need debt cancellation.

Secondly, to get your debt cancelled, you need to make an agreement with the IMF which normally means new borrowing and implementing a load of undemocratic conditions.

Thirdly, it doesn’t look at the responsibility of the creditors for the debts that were created. By failing to look at the responsibility of the creditors we have ensured that there are a lot of illegitimate debts still out there. In the most horrendous cases, these are debts incurred by dictators to oppress their people that are being repaid to this day by the very same people. Indonesians are still repaying the UK for arms sold to General Suharto that were used against civilians. Now, with cancellation, the UK will never have to admit responsibility.

TAP: Serious people oppose debt relief. Dambisa Moyo would admit that Africa’s obligations are appalling but would argue cancellation is useless when met with an infusion of fresh aid and that the examples of former Presidents Mobutu (of DRC), Muluzi (of Malawi) and Chiluba (of Zambia) suggest that “free” money entrenches inefficiency and bad government.

William Easterly might say that there are very few clean breaks with a corrupt past and that debt forgiveness delays proper economic reform via growth policies. For example, the DRC have had almost all their debt cancelled and how is President Kabila better than former President Mobutu? How do you answer these objections?

ND: I go along with them to a certain extent – sometimes a country will need aid when something terrible has happened, but generally aid is not the answer. In some ways, countries in the developing world need to stand on their own two feet and regain the initiative for their own economic decisions. We can’t hope for democracy in most African countries when they are completely under the thumb of western countries through the IMF, the World Bank and the World Trade Organisation.

In the debt crisis in Europe today we see that the lessons of the debt crisis in the Third World were never learnt. We still have a debt system that puts all responsibility of repayment on the debtor and none on the creditor.

Where I would disagree with Moyo and Easterly is that I don’t think everything would be absolutely fine if we had a world of perfect free trade.

TAP: The Free Africa Foundation and the South African Free Market Foundation suggest an alternative to you. They say rather than developing countries protecting their economies, raising tariffs and maintaining subsidies – as you would advocate – the rich world should make the game fair at its end.

At the moment, they say, the IMF demands that poor countries implement conditions that rich governments never would, but the rich world should practice what it preaches and give poor countries unprotected access to their markets equipped with their comparative advantages. What do you say to this?

ND: Firstly, it will never happen. Secondly, it wouldn’t make a better world. The idea that you shouldn’t be allowed to protect industries and agriculture that are necessary for your development as a country is no good.

Of course, I object along with the free traders to the idea that we are pushing subsidised goods onto poor countries who have had their own trade barriers ripped down. The hypocrisy is unbelievable. But I don’t think simply ripping down our own trade barriers would improve things. Take Haiti. Haiti had all its trade barriers ripped down, but at one point in the 1980s Haiti exported agricultural products to the rest of the world. After it had its trade barriers reduced by the IMF, its rice industry was absolutely wiped out. Of course, competing with subsidised products didn’t help but, even if it was competing with the world’s unsubsidised rice, it still wouldn’t be a good thing that their rice industry was wiped out. Haiti is now dependent on imported food and is therefore dependent on international commodity prices.

Malawi in the early 2000s experienced something similar. In fact, once upon a time Africa as a whole was pretty good at exporting food. Now, it isn’t and the solution to that isn’t a price war to the bottom. Unless African countries control their own food and then develop their own industries, they are always going to be dependent on producing very low end goods. No country in the world has developed like that.

TAP: You recently did a report on Zimbabwe’s debt. Tell me a bit about that and your interaction with African grassroots activists.

ND: The Jubilee movement is international and certainly isn’t run from London. Most groups were started in African countries but also in some Asian and Latin American countries. We have recently made a decision that we won’t campaign on countries where there isn’t a movement already on the ground.

Zimbabwe though has a really good movement on the ground called ZIMCODD which campaigns on many economic justice issues including debt. We are very conscious that Zimbabwe is coming up for a series of elections this year and that once the elements of Robert Mugabe’s government regarded as problematic by the west are removed then they probably will become eligible for debt cancellation.

We want to ensure that their debt cancellation would be used to empower Zimbabweans and to further democracy. We don’t think that simply pushing Zimbabwe down the debt cancellation path of countries like Zambia, Tanzania and so on would do that. That would push Zimbabwe into the hands of the IMF with all the policy conditionality that accompanies it. Also, all their debts, however illegitimately they may have been run up, will never be uncovered. Some will be paid back; some will be so-called ‘forgiven’. Ordinary Zimbabweans will get no education about how their economy works. We are working with ZIMCODD to call for a debt audit, which would open up that information to Zimbabweans.

TAP: Some of Zimbabwe’s debts are quite extraordinary. For example, the new-born nation inherited £700 million of the debt that Ian Smith, former Prime Minster of Zimbabwe (then Rhodesia), had run up buying arms to kill Zimbabweans. Zimbabweans paying off Smith’s debt or the people of the DRC paying off Mobutu’s debt is clearly wrong. But when people like former UK Prime Minister Margaret Thatcher sold Mugabe fighter planes in the 80s it was less obvious, although many were beginning to realise, that he was a monster. So how do we assess the nature of the debt without being unrealistically retrospective about the whole matter?

The HIPC initiative doesn’t make any distinction between debts. What we need to do is open the debts up to see the different economic and political reasons why these loans were given. ZIMCODD and the Jubilee movement across the world have never said that none of this debt should be paid back, but rather they say "let’s see the details".

The cases we highlight in the report are loans where stuff was sold to the regime or loans were given to Mugabe in the 80s and 90s where we think there is a good case for calling them illegitimate.

For example, the World Bank came up with a ridiculous scheme in the 80s to grow trees for fuel in an area where people already had fuel. Why on earth didn’t the World Bank send a few people from their offices in Washington and find out what people wanted on the ground in Zimbabwe? There are also examples of the Blair government selling Mugabe police vehicles which still have a debt attached at a point well beyond when the government could be termed legitimate. Other loans to Zimbabwe following droughts in the 80s and 90s imposed all sorts of inappropriate conditions on the country.

We must ask whether the condition negatively impacted Zimbabwe and whether the Zimbabwean people had any say over them. Just because we say retrospectively that we don’t like somebody doesn’t mean all the loans we gave them are illegitimate, but it does mean that we should look at them because it throws a light on how lending works and the power relationships involved in lending.

TAP: Let’s move onto South Sudan. What is your view on whether this infant country should inherit any of the $35 billion debt that has been defaulted on by the Khartoum dictatorship?

ND: Basically what's happened is that North Sudan came to an agreement whereby it would keep all the debt providing it was allowed to enter the HIPC initiative in two years. However, if it doesn't, the debt will again come up for negotiation. Nothing's been signed yet as a final agreement. It might well be that Sudan isn't allowed to do that, or indeed that the latest developments over the closure of oil fields means the whole negotiating process breaks down. Hence it's a bit of an unusual one.

If South Sudan does inherit any debt, we will relaunch the campaign for immediate and unconditional cancellation. The people of South Sudan should not inherit any debt from the Khartoum-based dictators.

Another aspect of this that concerns us is if the UK cancels Sudan's debt it will count towards the aid target. We have a big problem with this given that most of Sudan's debt to the UK is "made up money" – that is to say, it is mostly the result of high interest rates. The £678 million debt owed to the UK comes from loans to dictator Gaafar Nimeiry during the Cold War.

Rather than undergoing the HIPC process, a future Sudanese government should implement a debt audit process, to find out where the debt comes from, how legitimate it is, and learn lessons to guide future responsible borrowing. A debt audit would increase economic democracy within the country.

TAP: You evidently oppose the conditions that the IMF and World Bank attach to both loans and debt relief. Is it realistic to expect loans to be given without any stipulations at all? Would political conditions concerning democracy and rule of law be more suitable than economic conditions?

ND: We support things like the lender following due process and ensuring the money doesn’t end up in a Swiss bank account. “Conditions” are things that are unrelated to the loan itself, but that you have to do to get the loan. They are the wider political and economic reforms that you have to make in order to get the loan.

The IMF and World Bank have shifted their rhetoric. They now say, “We don’t do these nasty economic conditions any more. Now we have political conditions to do with democracy and good governance.” Actually, we find they are still talking about the same things, whether it is independence for the central bank or privatising state companies. The conditions are still unrelated to the loan and follow the same free market model we tend to impose on countries.

There is an area where I do think conditionality can work. If we’re seriously interested in democracy and accountability, then when we cancel debt somewhere why not say to the government that how this money is spent should be made accountable to civil society? A lot of people would oppose debt cancellation for Pakistan because the Pakistani government will spend it on nuclear weapons. But there is a very strong civil society base in Pakistan. So we should say to the Pakistani government that a "condition” of us giving you this is that this money be spent in a totally accountable way. Then you’re actually deepening democracy in a country rather than removing decision-making from the people by having the money accountable to the IMF and the rich world.

TAP: You wrote, in opposition to a free trade speech by David Cameron in South Africa, that “African prosperity…means protecting industries, developing alternative and complementary means of trading, control of food production and banking, progressive tax structures, controlled use of savings, and strong regulation to ensure trade and investment really benefits people”. This is pretty much the antithesis of the cut, privatise, liberalise model of the IMF. Which countries are following this model?

ND: There are some extremely interesting economic models in the world of which I’m sure David Cameron is extremely wary. Latin American countries, such as Bolivia, Ecuador, Venezuela, and to some extent Argentina and Brazil, are trying to regain their economic sovereignty by pursuing an economic policy that benefits the development of their country. There are older examples from East Asia of countries like South Korea which developed in a very different way to the model being pushed on countries today.

TAP: Are there any African countries doing this at the moment?

ND: Not really. Or, at least, let’s see what happens in North Africa. In sub-Saharan Africa, not much although there are some signs of the revolutionary spirit in North Africa reaching down into, for example, Nigeria. There have been small demonstrations in Angola, which is nevertheless pretty significant for that country.

I think there is the start of a move for accountability and against corruption. It will take a lot longer because Africa has come from a different level. For not just one but five hundred years, Africa has experienced the most extreme forms of exploitation. There are lots of groups working on this kind of stuff but it may take longer for their voices reach the levels of the political classes.

TAP: The debt audit is an idea pushed hard by Jubilee Debt Campaign. What do you want to get out of these audits and how would you normalise the process?

ND: We want the government of the debtor country to be part of the process, but in a very open way so as to open it up to the public. It has happened once in an official way in Ecuador. It was pretty good in terms of the government involving civil society and led to quite a good result in terms of Ecuador getting a write down on their debt, although civil society were very unhappy that the illegitimacy of some of those debts were not pursued further.

At the beginning, a group of people normally get together to call for an audit. Then, deciding the government is never going to agree, they try to get as much information as they can to hold their own audit, a citizens’ audit. Then they use the information they get from that to mobilise support for their cause. Nepal has said that as soon as its constitution is agreed, it will hold an official audit. Bolivia for a long time has had a commitment and some other Latin American countries like Paraguay have also got a commitment to hold an audit.

What we see now is a complete rejuvenation of the debt audit campaign because of what is happening in Europe. There are now debt audit campaigns in Greece, Italy, Spain, Ireland, Portugal and France, and I think there may be a call for an audit in the UK. It is very unlikely we’ll be able to convince our governments to hold an audit.

Although the Norwegian government has agreed to an audit as a creditor, it is going to audit the debts owed to it by countries around the world. Norway has led the way already by cancelling some of its debts on the basis of illegitimacy. I think we are increasingly going to see ordinary people forming into movements to see what their debts are.

TAP: So are ZIMCODD, the groups calling for an audit in Zimbabwe, ahead of the game in Africa?

ND: In some senses, but ZIMCODD are keenly aware that debt relief in some form will be coming to Zimbabwe in the next few years. It makes sense to really push for it now. They want to avoid the two options on the table at the moment. They don’t want to either follow the conventional HIPC initiative route with all the conditions attached or to pay off illegitimate debts with their minerals. Also, up until this point, many opposition politicians have been strongly in favour of an audit, although some senior figures seem to be having their minds changed. So you really need to push to make the opposition honour their commitment.

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