Committee for the Abolition of Illegitimate Debt

From September 9-15, 2008 the organisations working on debt held a North/South dialogue at Quito, Ecuador. After Dakar in 2000, Havana in 2005, this dialogue was concretised at the World Social Forum at Nairobi in 2007 with the creation of “International campaign against illegitimate debt [1]
. In view of the important context on debt (debt audit in Ecuador, documents on the odious debt Odious Debt According to the doctrine, for a debt to be odious it must meet two conditions:
1) It must have been contracted against the interests of the Nation, or against the interests of the People, or against the interests of the State.
2) Creditors cannot prove they they were unaware of how the borrowed money would be used.

We must underline that according to the doctrine of odious debt, the nature of the borrowing regime or government does not signify, since what matters is what the debt is used for. If a democratic government gets into debt against the interests of its population, the contracted debt can be called odious if it also meets the second condition. Consequently, contrary to a misleading version of the doctrine, odious debt is not only about dictatorial regimes.

(See Éric Toussaint, The Doctrine of Odious Debt : from Alexander Sack to the CADTM).

The father of the odious debt doctrine, Alexander Nahum Sack, clearly says that odious debts can be contracted by any regular government. Sack considers that a debt that is regularly incurred by a regular government can be branded as odious if the two above-mentioned conditions are met.
He adds, “once these two points are established, the burden of proof that the funds were used for the general or special needs of the State and were not of an odious character, would be upon the creditors.”

Sack defines a regular government as follows: “By a regular government is to be understood the supreme power that effectively exists within the limits of a given territory. Whether that government be monarchical (absolute or limited) or republican; whether it functions by “the grace of God” or “the will of the people”; whether it express “the will of the people” or not, of all the people or only of some; whether it be legally established or not, etc., none of that is relevant to the problem we are concerned with.”

So clearly for Sack, all regular governments, whether despotic or democratic, in one guise or another, can incur odious debts. coming from the World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

and UNCTAD UNCTAD
United Nations Conference on Trade and Development This was established in 1964, after pressure from the developing countries, to offset the GATT effects.

, development financing, cancellation of a part of the Ecuadorian debt by Norway), it was necessary that the Northern and Southern organisations meet to construct a common definition of the illegitimate debt, elaborate the common strategies and strengthen the campaign for the cancellation of the illegitimate debt.
During seven days of intense work, the principle debt networks combined to reinforce their collaboration [2]
. A certain degree of consensus was expected without ignoring the political divergences within the movements. It’s certainly an important step towards the construction of a common campaign and actions.

Towards the common characteristics of illegitimacy

The first two days were devoted to the study of the concept of illegitimacy and also its application. This concept is utilised differently according to the locations, the organisations, the strategies, etc. For certain organisations like the CADTM, the specific cases of the illegitimate debt emphasise the entire illegitimacy of the system of indebtedness as a means of domination of the countries of the South by the governments of the North; others differed on this issue. Nevertheless, everybody recognises that it is necessary to integrate the criticisms about the system in our work against illegitimate debt even if for some it is the “flaws” of the system of indebtedness. The systemic approach towards debt varies from one to another within the movements.

Regarding the application of the concept of illegitimacy, the common positions were cleared. The negative impacts of the loans to finance the projects (indirect or direct) were declared as fundamentals of illegitimacy based on peoples’ perspective; the conditionalities contribute to the illegitimacy of the loans. Moreover, only the citizen’s of a particular country can decide whether their regime was illegitimate or not, the creditors do not have any right to do so. The illegitimacy of a regime is sufficient to prove the illegitimacy of the loans.

Responsible financing and/or alternative financing?

The question of alternative financing and responsible financing was taken up in the last session of the study. Are they complementary or incompatible? All the movements recognise that it is necessary to work for a new financial architecture that promotes developmental politics respecting natural resources and human rights, putting an end to the transfer of resources from South to North, prioritising social needs, the democratic and participative practices. However, a few link it with structural changes. It is for example a priority for CADTM to set up the Bank of the South, while for others it might be regional banks, the reform of UN, the replacement of the World Bank and the IMF IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org by democratic institutions.

The other movements on the contrary consider establishing responsible lending as a sufficient strategy in the middle term, towards the construction of a new financial architecture and to struggle against illegitimate debt. The lending system would remain the same but the lending organisations better their terms of lending following certain principles or standards more ethical. The CADTM is not in agreement with this point of view as it simply strengthens the system of indebtedness and therefore, the current domination. The proof of the matter lie in the fact that this a preferred idea for a majority of the international institutions in which the World Bank also finds an opportunity to project itself as humane while hiding its real inhumanity.

For the strategies against the illegitimate debt

The four major priorities decided at Nairobi in January 2007 were affirmed by everyone in the campaign [3]
. Additionally, it is important to take note of the internal debt as a priority. An important part of the working time was given to establish these priorities, especially, those like “to compel the Northern and Southern governments and the IFIs to recognise the illegitimate debts and to take actions”. Indeed, the change of the new rapporteur at the Council for Human Rights of the UNO, the process of development financing, the World Bank’s document on the odious debt, the official excuses for the colonisation by the northern countries are the key points to push forward the ideas of illegitimate debt, the reparations, establishing the ideas in the UN agencies, the governments, the parliaments with the support of specific cases of illegitimate debt.

Strengthening the themes in relation to illegitimate debt

Another important point of the meeting: establishing the strategies on the themes linking it to illegitimate debt. With reference to the current context the issues brought up were the internal debt, the South/South lending, the food crisis, the financial crisis, the ecological debt and the climate change, the militarisation and the post-conflict situation, migration, etc.

Some organisations have already developed their ideas on these themes, nevertheless, at the international level it is important to build up a common strategy. Unfortunately, the theme ‘migrations’ didn’t raise a big enthusiasm in spite of the stakes of the current policies on migrations. CADTM would keep continuing working on this theme. The working groups were formed around these subjects to continue the work following the Quito meeting. Another big challenge regarding this work is to develop and intensify our collaboration with the movements that already work on these specific themes in order to include the dimension of debt in this analysis and to create common actions. The working group would prioritise the connections with the social movements (the World March of Women, Via Campesina and others), the ecological organisations, the NGOs…. working on these issues.

The co-ordination of the international campaign against the illegitimate debt

The International Facilitation Team [4]
was approved for the work and would play a role in the completion of the ideas finalised during the Quito meeting. The issue of setting up a permanent or a technical secretariat was put up but, was not decided and hence, the discussion will carry on in the future. The means of communication and co-ordination were renewed and would be developed [5]
. The global week of action against debt for the year 2009 would be decided in accordance to the efficacy of this common action. For the year 2008, it will be October 12^th to 19^th.

Support to the Ecuadorian debt commission and the people of Haiti

In organising the meeting of the international campaign against the illegitimate debt at Quito, the movements on debt wanted to reaffirm their support to the process of debt audit which is going on in Ecuador [6] and the importance of such audit initiatives that could be done in the other countries of the south. Two meetings were held with some members of the audit commission (CAIC) in order to have a better understanding of their work and to exchange ideas about the illegitimate debt. Moreover, the participants voted a resolution supporting the Haitian people, victims of the hurricaner [7]. Of course, the current impacts are because of the unpredictability of the natural catastrophe but are also due to the policies of structural adjustments imposed by the IFIs because of the debt. The struggle for debt cancellation continues……