Committee for the Abolition of Illegitimate Debt

The explosion of the economic crisis, the financial crisis and the food crisis in 2007-2008 shows just how interdependent the economies of the world are. Resolving the situation calls for radical remidies.

The economic and financial crisis.

In 2007-2008, the biggest international economic and financial crisis since 1929 broke out. Were it not for the massive and concerted intervention of public authorities in coming to the rescue of thieving bankers, the present crisis would already have reached more ample proportions. Here too, the interdependency is striking. Between 31^st December 2007 and the 18^th October 2008, all the world’s stock exchanges fell dramatically, by 30 to 40%, sometimes more, for the stock exchanges of the industrialized countries, 45% for Turkey, Argentina, Brazil and India, 60% for Russia and China [1].

The colossal build-up of private debts, which is entirely created from fictitious capital, has finally exploded in the industrialized countries starting with the United States, the most heavily indebted economy of the planet. Indeed, in 2008, the sum of public and private debt in the United States amounted to 50 000 billion dollars i.e. 350% of GDP GDP
Gross Domestic Product Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another. . This economic and financial crisis, which has already spread to the entire planet, will affect the developing countries more and more, even those which still believe themselves safe. Capitalist globalisation has not delinked or disconnected economies. On the contrary, countries like China, Brazil, India or Russia have not been able to protect themselves from this crisis, and this is only the beginning.

The food crisis.

In 2007-2008, the standard of living of more than half of the world population dropped dramatically when the price of food soared. There were massive demonstrations in at least fifteen countries in the first half of 2008. Tens of millions of people more than before faced hunger, and hundreds of millions had to reduce their food consumption (and consequently, their access to other essential goods and services [2]
).

All of this was the result of decisions made by a handful of companies in the agro-industry and the financial sector (the institutional investors Institutional investors Entities which pool large sums of money and invest those sums in securities, real property and other investment assets. They are principally banks, insurance companies, pension funds and by extension all organizations that invest collectively in transferable securities. who contribute to doping the prices of agricultural products) with the backup of the US administration and the European Commission [3]
. In fact, the percentage of exports in the world production of food remains small. Only a small part of the rice, wheat or corn produced in the world is exported, while by far the greater amount is consumed in the country of production. However, the price on the export market determines the price on the local market. The export market price is fixed in the United States, mainly in three stock exchanges (Chicago, Minneapolis and Kansas City). Consequently, the price of rice, wheat or corn in Timbuctu, Mexico, Nairobi, and Islamabad is directly affected by the evolution of the prices of these cereals on the United States stock markets.
In 2008, under pressure and to avoid being overthrown by the rioting at the four corners of the earth, the authorities in the developing countries had to take measures to guarantee their citizens access to staple foods.
This state of affairs resulted from several decades of governments gradually withdrawing their support from local cereal producers – who are mainly small producers – and following the neoliberal requirements imposed by institutions such as 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 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 as part of the Structural Adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/ Programmes and programmes to reduce poverty. In the name of the « fight against poverty » the institutions have convinced governments to carry out policies which have reproduced or even reinforced poverty. Furthermore, during the last few years, many governments have signed bilateral treaties (especially free trade treaties) which made the situation worse. The WTO WTO
World Trade Organisation The WTO, founded on 1^st January 1995, replaced the General Agreement on Trade and Tariffs (GATT). The main innovation is that the WTO enjoys the status of an international organization. Its role is to ensure that no member States adopt any kind of protectionism whatsoever, in order to accelerate the liberalization global trading and to facilitate the strategies of the multinationals. It has an international court (the Dispute Settlement Body) which judges any alleged violations of its founding text drawn up in Marrakesh.

Doha round of trade negotiations also had dire consequences.
What happened?
Act 1. The developing countries gave up the trade barriers which protected the local producers from competition from foreign agricultural producers, mainly North American and European large agro-exportation companies. These then swamped local markets with agricultural products sold for less than it cost local farmers to produce them. This bankrupted local producers, many of whom migrated to the big cities of their own countries or the industrialized countries. According to the WTO, subsidies paid out by the governments of the North to their big agricultural firms on the domestic market are not in breach of anti-dumping regulations. As Jacques Berthelot wrote, « whereas, for the man in the street, dumping means exporting at a price lower than the average production cost of the exporting country, for the WTO, it cannot be called dumping as long as exports are at the domestic price. Even if that is less than the average production cost [4]
. » In short, the countries of the European Union, the United States or other exporting countries may swamp the markets of others with agricultural products benefiting from heavy domestic subsidies. The corn exported to Mexico by the United States is a typical case in hand. Because of the free trade agreement (FTA) signed by the United States, Canada and Mexico, the latter has abandoned its trade barriers regarding its northern neighbours. Corn exports from the United States to Mexico increased nine fold between 1993 (the last year before enforcement of the FTA) and 2006. Hundreds of thousands of Mexican families have had to stop producing corn as theirs cost more than corn coming from the United States, produced with industrial technology and heavy subsidies. Not only was that an economic disaster, but it also undermined their cultural identity as corn is the symbol of life in Mexican culture, particularly for people of Maya origin. Many corn growers abandoned their fields and went to look for work in the industrial towns of Mexico or the United States.

Act 2. Mexico, which has thus became dependant on US corn to feed its population, was confronted with a sharp price rise of the cereal caused partly by speculation on the stock exchanges of Chicago, Kansas City, and Minneapolis and partly by the production of ethanol from corn by the northern neighbour.
The Mexican corn producers were no longer there to satisfy domestic demand and Mexicans were confronted with a soar in the prices of their staple food tortilla, the cornmeal pancake which replaces the bread or the bowl of rice of other parts of the world. In 2007 enormous riots shook Mexico.
In specific conditions, the same causes have produced almost exactly the same effects. The interdependency of food markets on a global scale was pushed to a level never reached before.
The global food crisis lays bare the workings of our capitalist society: the pursuit of maximum private profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. in the short term. Capitalists see food as nothing more than a merchandise to be sold for the highest possible profit. Food, an essential element of survival for human beings, is transformed into an instrument of pure profit. This sinister logic must be brought to its knees.
It is time to abolish the control of capital over large-scale production and marketing and give priority to policies of food sovereignty.

The climate crisis.

The effects of climate change have temporarily disappeared from the headlines, supplanted by the financial crisis. Nevertheless, the process is underway on a global scale and here too, interdependency is obvious. Indeed the populations of the « poor » countries will be much more affected than those of the « rich » countries, but no one will come out of it unscathed.

The convergence of these three crises shows populations the need to free themselves from capitalist society and its productivist model. The interdependency of capitalist crises highlights the need for an anti-capitalist and revolutionary programme on global scale. Only international and systemic solutions can make for a favorable outcome for the populations and the environment. Humanity cannot be fobbed off with half measures.

Translated by Elizabeth Anne in collaboration with Vicki Briault