THE INJUSTICE OF THE DEBT BURDEN AND THE PROBLEM OF ILLEGITIMATE DEBTS
The payment of huge amounts of debt service amplifies the effects of the
food and climate crises and hampers the ability of countries and peoples
of the South to deal with these crises. This is part of the injustice of
the debt and for this alone debt cancellation is urgent.
But the debt is more than just the problem of losing much needed
resources to debt payments. Debts
used for harmful projects or to impose harmful conditionalities such as
those which contributed to the food and climate crises are illegitimate
debts and should not be paid.
THE FOOD CRISIS
The high price of oil, worsening climate conditions and price
manipulation by domestic and international trading cartels and
speculators have certainly contributed significantly to the abrupt,
massive increase in the prices of food. But the food crisis can be also
be traced to economic policies that have been imposed on the countries
of the South for decades, with the use of debt, access to credit and
debt relief as instruments for coercion.
The combination of several policies that have been part of
conditionality packages of the IMF and World Bank have resulted in
falling productivity in basic food agriculture, steep increase in the
costs of food production, the huge reduction in land used for producing
staple food for domestic consumption, and less sustainable agricultural
practices.
Fiscal and monetary conditionalities included the removal of state
subsidies for production of basic food crops and reduction in spending
for public infrastructures such as irrigation systems. Prescriptions for
export-oriented high growth economic strategies led to heavy reliance on
expensive imported fertilizers and pesticides, massive shifts to
non-staple and non-food export crops, and the conversion of agricultural
lands to export processing zones. Liberalization of trade gave rise to
unfair competition from subsidized food products from the north.
Liberalization of finance capital further fueled real estate industries,
expanding land use conversion from production of food to private housing
estates, golf courses and resorts. The privatization of public services
and utilities also meant greater cost of food production and distribution.
In addition, the effects of huge debt payment on government resources
include the deterioration and neglect of many public infrastructures
needed to boost agricultural production, such as irrigation systems, and
farm to market roads.
The ability of many countries of the South to produce sufficiently for
their own food needs and keep prices accessible to the domestic market
have thus been steadily and dramatically eroding since the 1980’s. There
has been a significant increase in the number of net food importing
countries in the past two decade, diminishing capability to maintain
adequate buffer stocks of staple grains, and increasing vulnerability to
world food market supply and price dynamics.
CHALLENGE TO THE G8 GOVERNMENTS
Small farmers and landless peasants have had no real benefits from the
spiraling increases in of food prices, as farm gate prices continue to
be low. It is the trading cartels and speculators that have been
generating big profits.
The G8 governments bear primary responsibility for the debt burden and
the debt-related policy conditionalities that contributed to the food
crisis and magnify its impacts. They are the biggest bilateral lenders
and the most influential members of international financial
institutions. They should act immediately and decisively for the
cancellation of all illegitimate debts. The imposition of
conditionalities through loans debt and debt cancellation must stop. The
G8 governments and the international financial institutions should
respect the action of Southern countries to reverse the policies that
have led to the food crisis.
The G8 governments also share responsibility for other factors behind
the crisis — as governments of countries which are home to the biggest
multinational food corporations and food commodities speculators, and as
powerful governments shaping bilateral and multilateral trade agreements
affecting food. The G8 governments should regulate their predatory
corporations and investors, ban speculation on food commodities, and
stop pushing unfair trade agreements.
THE CLIMATE CRISIS
The G8 governments also bear primary responsibility for the climate
crisis. Half of the world’s green house gas emissions come from the G8
countries. Most, if not all, of the G8 countries are lagging behind the
reduction targets of GHG emissions. Even the European Union, with its
bold plan of being the first de-carbonized economy in the world, has
undermined its own claims by planning to build 40 major new coal power
plants in the next five years.
And again, as the most powerful members of international financial
institutions, they are accountable for debt-related projects and
policies that exacerbate the climate crisis.
The World Bank and the regional development banks are major lenders to
projects involving fossil fuel industries, paid for by peoples of the
South. The Export Credit Agencies of G8 countries also provide financing
to these industries, part of which translates to liabilities of South
governments, again paid for by peoples of the South.
Since the signing of the Climate Convention in 1992, and even after
instituting “environmental policies,” the World Bank approved more than
133 financial packages to oil, coal and gas extraction projects,
comprising mainly of loans but also including equity investments,
guarantees and some grants. The total amount exceeds US$28 billion
dollars. Fossil fuel corporations based in G8 countries benefit from
almost every project finance package. The International Finance
Corporation of the World Bank is increasing its fossil fuel lending
portfolio.
The Asian Development Bank, to which Japan and the United States are the
biggest shareholders, is a major lender to coal, oil and gas projects in
Asia, approving close to US$2 billion worth of loans since the year 2000.
Other loan-financed projects and policy conditionalities of
international financial institutions have led to massive deforestation,
another major factor to climate change. These include, for instance, the
building of large-scale dams, road development in tropical forests, and
the promotion of palm oil production for export.
It is indeed ironic and deplorable that with such a record, the G8
governments is granting the World Bank a pre-eminent role in global
financing of climate mitigation and adaptation and the promotion of
“clean technology” and “clean development.” In the July 2005 Summit, the
G8 declared that the “The World Bank will take a leadership role in
creating a new framework for clean energy and development, including
investment and financing.” The regional development banks are claiming
similar roles.
The World Bank announced recently that it will establish Climate
Investment Funds (CIFs). Aside from the obvious inappropriateness of the
World Bank as manager of these Funds given its role in worsening the
climate crisis, the concepts, design and intentions of the funds are
seriously flawed.
The G8 governments are not only promoting false solutions through the
different facilities under the auspices of these international financial
institutions, they are intending to finance these through loans, thus
adding to the debt burden of developing countries. The UK government has
been leading the call for other governments to contribute to funds to be
administered by the World Bank as loans.
Instead of extending loans for climate mitigation and adaptation – the
G8 governments should begin with the recognition of the huge ecological
debt that they owe the countries and peoples of the South.
They should finance climate mitigation and adaption in the South as part
of restitution and reparations for the environmental damage and
destruction their policies and programs, their economies and
corporations have caused. These funds should be managed by democratic
and accountable institutions.
CALLS AND DEMANDS
We urge all peoples’ movements and organizations (labor, farmers, women,
youth, indigenous peoples), social and political movements, community
and citizens’ groups, and faith-based organizations, to challenge the
governments of the G8 countries to acknowledge their responsibility for
the food and climate crises and the continuing problem of debt, and take
decisive action to:
1. Cancel all illegitimate debt.
2. Stop financing projects and policies that contribute to climate change
3. Respect the South countries efforts to reverse harmful policies that
led to the food crisis.
4. Ban speculation on food prices.
5. End the practice of using loans and debt cancellation to impose
conditionalities.
6. Pay restitution and reparations for the huge ecological debts owed to
the South.
7. Facilitate the return of stolen assets kept in the banks in the G8
countries.
