Third World debt resulting from bad lending policies of developed nations should be written off, says Desmond Tutu
DEBT repayment has become an important mechanism for transferring wealth from developing countries to the financial giants of the northern hemisphere.
According to the United Nations, developing countries paid US$1,662-trillion in debt that was due between the years 1980 and 1992. This is three times the original amount owed in 1980. What is even more staggering is that despite this repayment, the total debt of developing countries is still estimated at more than US$1,3- trillion. These figures are so large that, for many of us, they are mind-boggling.
This transfer is no accident. It is the result of a coherent set of decisions and forms part of a system of global relationships which reproduces the wealth- poverty dichotomy.
The late French president Francois Mitterrand was forced to admit at the G7 summit in Naples in 1994 that “despite the considerable sums spent on bilateral and multi-lateral aid, the flow of capital from Africa towards the industrial countries is greater than the flow of capital from the industrial countries to the developing countries”.
This is underlined by a report last year which said Britain was squeezing cash out of the world’s poorest countries by demanding levels of debt repayment far outweighing new loans or aid. According to the European Network on Debt and Development, Britain has been a net recipient of cash from developing countries since 1981. This is hardly something of which any nation can be proud.
It is not only the policies of governments and world banking institutions that have contributed to the debt problem. Big business, in particular the oil industry, has exploited the natural resources of many developing countries, in the process frequently pandering to the greed of some of its despotic leaders.
Nigeria, for example, is a country with enormous oil resources and a political establishment long in decay. More than a dozen international companies are enmeshed in an oily romance with this West African nation, despite her policies.
According to the Alternative Information and Development Centre in Cape Town, the ratios of foreign debt to gross national product (GNP) in sub-Saharan Africa rose from 51% in 1982 to 100% in 1992, a period when the so-called “Third World debt crisis” was allegedly resolved.
The external debt of developing countries has become an eternal debt and stands as the largest immediate obstacle to growth and sustainable development.
There are sufficient illustrations in developing countries that, despite the inequities of the past, they have been able to stem the tide of economic decline. Many, however, are still faced with huge debt, and will be restricted in their ability to grow while they continue to have to service debts acquired by previous governments.
Where the debt has been incurred without the concurrence of the debtor, or where the debt has been allowed to grow to such a size that it becomes a laughable proposition to suggest that it can ever be repaid, then a reshaping of the world economy is required.
South Africa labours at present under a debt of R311-billion or US$70 billion. Interest repayment alone on this amount is the second highest expenditure after education in South Africa’s current Budget. It should be clear that no country can be expected to achieve economic miracles when restricted by such a yoke. If this is the case with South Africa, which has a well- developed infrastructure, I leave it to your imagination as to how much worse is this scenario in less-developed countries.
As we approach the new millennium, the time has come to invoke the Doctrine of Odious Debt. This doctrine, first used almost 100 years ago by the United States, argues that where a debt has been incurred that is not in the interests of the state, but to strengthen a despotic regime, to repress the population that fights against it, etc, then it becomes odious to the population.
The debts of developing states that have arisen as a result of bad lending policies by the developed world should be declared odious and written off.
In the case of South Africa, its foreign and domestic debt was incurred, by and large, under the apartheid regime, and should similarly be declared odious and written off. In terms of debt repayment this would mean we would have a massive R39-billion per annum which would be available for social reconstruction and development.
What is more, the multiplier effect of making such an amount available to a country that has often been described as the economic hub of sub-Saharan Africa cannot be gainsaid. Many countries in the region would stand to benefit. Of course, the multiplier effect would also apply if the debts of other countries in the region were similarly written off in terms of the creation of the international agency I will propose.
And while I have suggested that the sums owed by poor countries are large, they are, when measured against the capital that flows in and out of the City of London each year, the small change of the international financial exchanges.
In case you think I am being too radical, let me remind you that Britain’s Chancellor Kenneth Clarke has said he is prepared to increase the slice of outstanding loans that can be written off, currently fixed at 67%, to 80 or 90%. What is to stop other major industrial countries from doing likewise?
What is of concern, however, is that a number of lenders, in particular Japan, have refused to offer anything more than the possibility of more generous relief on a case-by-case basis.
Furthermore, while Britain may declare itself prepared to increase the percentage of loans that can be written off, I have not to date read of reports that the country has actually written off substantial debts of developing countries.
Lest I be accused of wanting sacrifices only from the industrialised nations, South Africa wrote off Namibia’s debt to it, believing it effectively to be an odious debt incurred while Namibia was illegally occupied by the apartheid government.
Cancelling the debt of developing countries should not be done without establishing a mechanism for its control and some important principles that will determine future economic relations between the rich and poor, thus contributing to peace, stability and prosperity.
I, therefore, propose the establishment of a mediation council, whose responsibility will be to negotiate the repudiation of debts of developing countries. Such a council should consist of four parties – an independent international body, a similar regional body (for example, the Organisation of African Unity), the International Monetary Fund, and the country concerned.
In addition, I propose the adoption of the following principles, at least:
* No country should be permitted to borrow more than a fixed percentage of its GNP wihout first going to its people, for example in a referendum, to obtain their approval. In this way, communities would be able to contribute to national debates as to whether they wish to incur international debt.
* No debt should be incurred for the purposes of military expansion or arms purchases of any nature whatsoever or for maintaining oppressive governments that violate fundamental human rights.
* Should a country expand its armed service or military capacity to the detriment of its people, the international community should immediately cease all loans.
* Preference should be given to making loans to countries which have illustrated good stewardship in the use of their resources.
* Preference should be given to countries that need loans for health, education, social services, infrastructural development and the like.
* The rape of the environment or the denial of human rights by any country should disqualify it from receiving loans.
* A country which has shown a commitment to democratic government and regular free elections should receive preferential treatment.
* Countries receiving loans from any international financial institution or commercial bank should submit themselves to a strict monitoring and accountability process so that if it is found that debt relief is being used for military or other purposes that do not advance the socio- economic development of people, the loans be suspended.
* This monitoring process must ensure that where a debt has been cancelled, any provision that would have been made to service the loan had it not been cancelled, must be redeployed for the development of people and infrastructure.
The danger of such principles is that where a government ignores them, and has its loan called in, it is once again ordinary people who suffer its consequences. In such cases, the full weight of the mediation council and the international community should be brought to bear on the recalcitrant government, in much the same way as the apartheid regime was brought to its knees by international pressure.
Perpetuating the status quo cannot achieve the development needed in our village in the next century. It will make poor countries poorer, and rich ones richer, with all the resultant threats to world peace that this involves.
We must create models of hope that will give the vast majority of people in the world a new chance. We have a responsibility as we prepare for the next millennium, in our global village, to ensure that all people have the same opportunity to reach their full potential.
This is an edited version of the speech given in London this week by the head of the Truth and Reconciliation Commission