“Foreign aid” is like an artichoke. Just as an artichoke looks fairly attractive and colourful when in flower, so foreign aid sounds like a good idea. But to get to the ridiculously small edible part of the artichoke, one has to pluck innumerable leaves one by one and discard them as worthless. Most aid consists of these useless leaves. By and large, it comes in the form of “technical assistance”, a neat euphemism for dumping obsolete and outdated technology on developing countries, and in the shape of “experts” and “consultants” whose advice is geared largely to increasing their own business. When “aid” is given in terms of hard cash, it is a loan with numerous strings attached – the money must be spent on buying goods and services from the donor country, or on specific projects that the recipient country does not really need, or “structural adjustments” must be made.
Artichokes have their enthusiasts who hold them in high esteem. Foreign aid, too, has its specialists whose function is to perpetuate this loan sharking. In particular, bogus “development theories”, which we still teach in our universities, have given it a veneer of academic respectability. Development has been one of the cruellest jokes that the west has played on the poor states of the world, and foreign aid has been an integral part of this diabolical package.
To appreciate just how we are choking the poor countries by shoving the artichokes of foreign aid down their throats, consider the following. In 1973 Britain gave £4 million in aid to Costa Rica. To date, we have received £7 million on that loan; and Costa Rica still owes Britain more than £1 million. In 1985 Mozambique owed $929.6 million to industrialised countries; the figure has now ballooned to more than $2 billion. The debt has grown not because Mozambique has carried on borrowing – indeed for the last ten years the west has refused to give aid to Mozambique – but because of a growth in debt service arising from the rescheduling being included in every subsequent rescheduling. Last year alone, developing countries paid $270 billion in debt service – that’s $60 for every man, woman and child. In fact for every £1 given in aid, the industrialised countries received £9 back in debt service. So who is giving aid to whom?
Debt repayment is increasing absolute poverty in poor countries. The very things that can help raise people’s quality of life – education, health care and employment – are being ravaged by governments struggling to meet crippling repayments to western financial institutions. Under IMF and World Bank pressure, they are forced further to cut spending on social services in return for more aid that will take them even deeper into debt.
Jubilee 2000, an alliance of 90 religious and other non-governmental organisations, points out that the closest parallel to the debt crisis is the Atlantic slave trade. It, too, was accepted as a necessary part of business life, and provided enormous benefits for the west. As a result many African nations were devastated and countless people reduced to abject poverty and slavery. But just as the abolitionist stood up to slavery, so now ordinary people must stand up to end the oppression of this new form of bondage. Jubilee 2000 has organised a worldwide campaign to persuade the world’s richest countries to cancel third world debt. On 13 June an estimated 50,000 people formed a human chain along the banks of the Thames in an attempt to draw attention to the debt crisis.
Gordon Brown may be emerging as the new, and long-awaited, champion of the debt crisis. At the G7 finance ministers meeting the same weekend as the Thames-side demonstration, he led the way in hammering out a deal to write off $50 billion of third world debt and to reduce repayments on loans from overseas ministries by a further $20 billion. Britain has already pledged $171 million towards this end. The Chancellor also argued that some of the debt-financing needs should be met by the sale of $2 billion of the IMF’s gold reserve. But, as Brown himself realises, these are paltry figures, a mere half-step to tackling “one of the greatest injustices of our time”.
The initiative does, however, have a few innovative features. For the first time all creditors will contribute. Brown has challenged the multinational companies to match the commitment of G7 governments pound for pound. Moreover, the goal is not limited to reducing debt but is to offer an exit from the whole process of debt rescheduling.
Serious flaws remain. To receive debt relief, poor countries have to jump through several hoops. For example, they must have a six-year track record in implementing IMF-approved economic policies. They also have to demonstrate that their debt is unsustainable – for example, that interest payments exceed certain ratios to government and export revenues. This is a cunning way to minimise the debt problem: the IMF always makes ridiculously optimistic assumptions about export growth and is thus able to limit writing off the debts to as few countries as possible.
Some 43 countries are now considered to be eligible for debt relief. This is less than half the number that most pressure groups would like to see in the scheme.
Cancellation of third world debt is not high on the agenda of the G7 summit in Cologne. But it should be. It is the greatest moral imperative of our time. It is also, by the standards of what we spend on arms, fashion and dog food, an insignificant sum. Moreover, devastated societies do not make good markets: thus it will make sense even for selfish reasons to write off third world debt. It is something the industrialised countries should do simply because they can.
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