Committee for the Abolition of Illegitimate Debt

So, maybe the issue is not necessarily to continue adding new elements to the framework, but simply to assess if some of the elements that are already present are working, and if it’s not the case, whether they can be eliminated. The one element that stands out on that regard is Debt as a development policy tool.

Since the implementation of the Plan Marshall in Europe, policy circles have been burdened with the notion that injections of capital and fresh financial resources constitute one of the basic components of development. Based on this premise, 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.

has tried throughout the last 69 years to help countries to borrow their way into development. As it’s demonstrated on my book, the results of this approach on the living conditions of millions of people around the world have been dismaying [2].

Instead of providing developing countries with fresh resources, the debt system has forced those same countries to prioritize payments to their creditors over the provision of basic social services. According to World Bank data, just in 2010, developing countries paid USD 184 billion on debt service Debt service The sum of the interests and the amortization of the capital borrowed. , roughly the equivalent of three times the resources required per year to secure the fulfillment of the MDGs. Even more troublesome between 1985 and 2010 net public debt flows to developing countries, that is the difference between debt disbursements and debt payments, have reached USD 530 billion [3]. To place this number in context, the net resources transferred by developing countries to their creditors is the equivalent of five times the resources devoted to the Plan Marshall.

Throughout this time, Debt has been used by the IFI´s and creditor countries alike to push countries to adopt policies that if anything prevent them from securing minimum living conditions for their populations. From the privatization and downsizing of public services, to trade opening that has seriously undermined food sovereignty, the policies enforced upon developing countries have seriously undermined the capacity of those countries of achieving development trough endogenous means.

Therefore, if something needs to be done, is to cancel the public debts of developing countries. Contrary to what skeptics point out, this debt represents a drop in the bucket: in 2010, it reached USD 1.6 trillion (total public external debt), or less than 5% of the resources devoted by the US Government to rescue the banks [4]. If such a massive amount of resources can be marshaled to secure the bonuses of banking executives, is it too much to ask to ask for a small share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. of those same resources to secure better living conditions for hundreds of millions of people around the world? Clearly this is a political question, rather than an economic one, but the fact remains that debt continues to be a major obstacle for development. As CADTM has advocated during the last 24 years, let’s get rid of it.