Larry Elliott
It is just before dawn in Kinshasa on October 30 1974. In a boxing ring in the middle of a football stadium lies George Foreman, knocked out by Muhammad Ali in one of the biggest sporting upsets of the century. As lightning crackles overhead, 60 000 Zaireans cheer Ali, world champion again after seven years.
It took 10 seconds for the referee to count Foreman out and end the contest billed as the Rumble in the Jungle. It has taken 24 years for the West to face up to the enormity of the debt crisis in the developing world.
The need to relieve the poorest nations of their unpayable debts has moved to the top of the agenda for the meeting of the Group of Eight (G8) leaders in the British city of Birmingham this week. Backed by a coalition of churches and charities, Prime Minister Tony Blair will urge the West to make deep cuts in the debt burden an urgent priority for the summit.
Officials were due to spend the week piecing together a deal to provide speedier relief for seven African countries grappling with mountainous debts in the aftermath of military conflicts – Rwanda, Burundi, Liberia, the two Congos, Sierra Leone and Somalia.
And Britain is attempting to bring all eligible countries under the umbrella of the joint World Bank-International Monetary Fund (IMF) Highly Indebted Poor Countries Initiative by the millennium.
Ali and Foreman collected more than $5-million each for 24 minutes’ work, provided by Zaire’s tyrannical president, Mobutu Sese Seko, to spread his name and the name of his country across the globe. The fight did that all right. But at what a cost – $10-million was money Zaire could ill afford 24 years ago, and the torrential storm that flooded the Stade du 20 Mai after the fight’s end was symbolic of the economic torrent that was to engulf Africa from the mid-1970s.
When the bills started to come in for the continent’s collective Rumble in the Jungle, they could not be paid. One poster for the fight, “From the slave ship to the championship”, had to be withdrawn after it offended Zaireans. It has an ironic ring to it now, because for many African nations the crushing burden of debt has returned them to a form of slavery.
How so? Simple statistics illustrate the horrific cost of the crisis. According to the United Nations Human Development Report, about a quarter of the world’s population, some 1,3-billion people, are living on incomes of less than a dollar a day. Nearly a billion are illiterate, some 840-million go hungry or are living from hand to mouth. And whereas people in the West can expect to live until almost 80, nearly one-third of the people in the least developed countries are not expected to survive to 40.
The epicentre of the problem is sub-Saharan Africa, which accounts for 33 of the 42 low-income countries that the World Bank rates as highly indebted. In 1962, sub- Saharan Africa owed $3-billion. By the early 1980s its debts had mounted to $142- billion. Today the debt mountain stands at $222-billion, which is about $370 for every man, woman and child in the continent. And it is getting bigger as countries fall behind with repayments.
What is more, the gulf between rich and poor is getting wider. The share of the poorest 20% of the world’s people in global income stands at a 1,1%, down from 1,4% in 1991 and 2,3% in 1960. The income of the top 20% was 30 times higher than the poorest 20%in 1960. By 1991 it was 61 times higher. The UN says the latest figures put it at 78 times as high.
It is not just in per capita income that the disparities show up. The UN’s annual Human Development Index is effectively a league table for standards of life looking at social indicators that include illiteracy, child mortality, access to health services, and life expectancy. For the richest 20 countries, the index reveals few serious social problems. In Britain, ranked 15th, nobody lacks access to health care or water, there is no adult illiteracy, 10 000 children die before the age of one, and every child goes to school.
Now take Ethiopia, 170th out of 175 in the table. There, 54% are without access to health services and 75% lack access to safe water. The adult illiteracy rate is 64,5%, 625 000 children died in 1995 before the age of one. There are no figures for children not in school.
Aid agencies say that an attack on poverty must start with a grassroots expansion of basic social services, particularly health and education. However, the poorest nations have little to spare on schools and hospitals once they have serviced their huge debts.
According to Oxfam, more than 100 000 Ethiopian children die each year from easily preventable diseases. In Africa as a whole, one out of every two children does not go to school, but governments spend four times more in debt payments to creditors in the West than they spend on health and education.
Why did this happen? One school of thought says the West is to blame for encouraging developing nations to borrow recklessly recycled petro-dollars from Organisation of Petroleum Exporting Countries (Opec) for inappropriate projects. Another school lays the blame with corrupt post-colonial elites, who squandered money from loans on grandiose projects or salted it away in Swiss bank accounts.
There is an element of truth in both arguments, but as David Landes says in his book, The Wealth and Poverty of Nations: “The continent’s problems go much deeper than bad policies, and bad policies are not an accident.”
“Good government is not to be had for the asking,” Landes argues. “It took Europe centuries to acquire it, so why should Africa do so in mere decades, especially after the distortions of colonialism?”
Many of the nations that gained independence in the 1950s and 1960s were artificial constructs of the colonial era, built around commodities, with borders often cutting across racial and tribal lines. Over this was laid a centralised state, with power concentrated in a party, a ruling elite and ultimately an all-powerful leader. This quasi- Soviet system was a disaster, particularly when the economic climate turned nasty.
In the 1950s and 1960s rising commodity prices fed through into higher per capita incomes and more money for health, education and infrastructure, and still left something to be creamed off into Swiss bank accounts. But in the 1970s and 1980s commodity prices fell sharply, so they are now lower in real terms than during the Great Depression 70 years ago.
The problem was intensified by higher oil prices, and the debts run up to pay for imported machinery designed to enhance industrialisation. Africa was caught in the jaws of a vice; and most of the borrowed money went on projects utterly inappropriate for the needs of developing countries.
The West then imposed economic policies on the indebted countries that made matters worse. The idea behind structural adjustment was countries would export their way out of trouble, but since they were often one or two-commodity economies, attempting to increase exports involved increasing supply, which drove down prices.
Aid agencies argue that action to help the poorest countries is long overdue. Addressing Chase Manhattan shareholders on the eve of the Ali-Foreman clash, Nelson Rockefeller said: “I hope you enjoy the fight, because you’re paying for it.”
Rockefeller was wrong. The banks were bailed out by the IMF, which lent money to poor nations so they could pay off their commercial creditors. Zaire has not been so lucky. There the people are still picking up the tab.
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