Committee for the Abolition of Illegitimate Debt

CADTM International is a network made up of some thirty organizations active in more than thirty countries on four continents (Africa, Asia, Latin America and Caribbean, Europe). Its major field of work, centred on the issue of debt, is carrying on actions and developing popular radical alternatives toward the emergence of a world based on sovereignty, solidarity and co-operation among peoples, respect for nature and for life, equality, social justice and peace.

During the 1990s, the CADTM called attention to the need to build just and equitable relations between the countries of the North and South through cancellation of debt. In particular, it stressed the destructive impact on the development of the countries of the South of the debt mechanisms made use of by the multilateral financial entities (the International Monetary Fund 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 and 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.

), the governments of the North via the Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.

, and the major private international financial groups.

Whereas the priority of the CADTM, as its original name indicates, was cancellation of debt in the countries of what was once referred as the Third World, its broader goal is to make clear, through its analyses and its activism, how the “debt system” in fact subjugates the people of the most industrialized countries as well as the populations of the countries of the Global South. As stated in the Political Charter of CADTM international: “In both the North and the South, debt is one of the devices used to transfer the wealth created by workers and small producers to the capitalists. Public debt is used by the creditors as an instrument of political and economic domination that establishes a new form of colonisation, with the local ruling classes taking their commission in the process. Abusive private debts claimed from the popular classes are a tool of dispossession and oppression.” [1]

Before we get to the meat of the subject, we should clarify vocabulary.

 Terminology: South/North – Developing/Developed. Just What Are We Talking About?

 Lexical choices are not neutral

The terms chosen to designate the different categories of countries convey the theoretical and political divergences that exist when it comes to analysis and strategy. Generally, these divergences are related to the social content of the economic concepts: the economic categories are often presented as reflecting natural laws in which social relations and power struggles have a limited place. In the dominant view, underdevelopment, for example, is perceived as being a simple time lag, sometimes ascribed to natural causes. Let us have a look at some of these terms:

1. Underdeveloped countries: this old term has become obsolete because of its derogatory overtones.
2. Developing countries: this expression is less derogatory than the first but subscribes to the same biased notion of a simple time lag. Moreover, it presumes a trajectory of improvement of the situation that is not always verifiable. The World Bank still classifies countries as “developed” or “developing.” [2]
3. Least advanced countries: a term used in the classifications of international authorities, but it combines all the preceding defects.
4. Third World: a term invented by Alfred Sauvy in 1952 (by analogy with the Third Estate) and which was popular during the Cold War as a means of naming all the countries taking an independent stand, whether with regard to the United States or to the USSR. [3] Two facts have rendered the use of the term more problematic, although the habit still persists: on the one hand, the disappearance of the USSR and the Soviet bloc, and on the other hand the growing heterogeneity of the former countries of the Third World, several of which have experienced actual economic development, or even, in some cases, have joined the group of “developed” countries in the World Bank’s classification. In the early twenty-first century, China became the world’s second-ranking economic power.

5. Poor countries: a term that focuses on the economic poverty of the majority of the population in the countries concerned and obscures the blatant inequalities that exist there. Moreover, a number of countries considered poor are actually very rich in natural resources, not to mention their cultural wealth. These countries should be called “exploited” or “impoverished” countries.

6. Countries of the South: a convenient term to stigmatize the break with the countries in the northern hemisphere, often developed and dominant, but which has the twofold defect of ignoring the numerous exceptions to this geographical classification and of implying that geography is somehow a determining factor. This is why in Latin America “Global South” and “Global North” are used, in order to distinguish them from geographical realities. We also speak of “the Souths” in the plural, to highlight the heterogeneity among many countries of the South.

7. Peripheral countries: a term belonging to the Structuralist and Marxist vocabulary which stresses the domination that is at the heart of a global capitalism run by the most industrialized countries and their imperialist policies.

8. Emerging countries: a term designating the economies that have initiated an undeniable development process which distinguishes them from the body of the formerly more homogenous Third World – China, India and Brazil being the principal examples. This term is often enough replaced by “emerging markets,” a substitution that clearly reflects the neoliberal vision of a development that can only be achieved through insertion into the international division of labour imposed by capitalist globalization. It should be noted that five countries labelled “emerging countries” have developed mutual collaboration in a context called BRICS BRICS The term BRICS (an acronym for Brazil, Russia, India, China and South Africa) was first used in 2001 by Jim O’Neill, then an economist at Goldman Sachs. The strong economic growth of these countries, combined with their important geopolitical position (these 5 countries bring together almost half the world’s population on 4 continents and almost a quarter of the world’s GDP) make the BRICS major players in international economic and financial activities. , after their respective initials: Brazil, Russia, India, China and South Africa.

9. Countries in transition towards a market economy: a euphemism for countries of Eastern Europe which, after the collapse of the USSR and the explosion of the Soviet bloc, underwent a process of capitalist revival.

In this “ABC,” in spite of their various shortcomings, the following terms are used as synonyms: countries of the South, South(s), Periphery, impoverished countries, developing countries, Third World.

They are usually contrasted with: countries of the North, North, Centre or Core countries – also used as synonyms. This group is dominated by the main industrialized countries or imperialist countries.

In spite of our reluctance and because of statistical data, the CADTM feel we have no choice but to use categories established by the World Bank. That is because the CADTM do not have the resources to set up our own database on a global scale, one that would take into account more relevant standards than those the World Bank use to establish categories of countries.

 As of 2025

In 2025, according to the World Bank, “developing countries” comprises three categories, according to the countries’ incomes, namely:

• 26 “low-income economies” (countries where the 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. per capita is lower than or equal to $1,145 per year);
• 51 “lower-middle-income economies” (countries where the GDP per capita stands between $1,1146 and $4,515 per year);
• 54 “upper-middle-income economies” (countries where the GDP per capita stands between $4,516 and $14,005 per year). [6]

This classification ranks as ‘developing’ countries with economies as different from each other as Thailand and Haiti, Brazil and Niger, Argentina and Bangladesh. The World Bank includes China among the 54 “upper-middle-income” economies. We have decided to treat China on its own considering the country’s economic significance and the size of its population. According to our approach there are 130 countries of the South in 2020 (vs. 131 according to the World Bank).

Schematically speaking, the South includes Latin America, the Caribbean, the Middle East, North Africa, Sub-Saharan Africa, South Asia, South-East Asia and the Pacific, Central Asia, Turkey and Central and Eastern European countries outside the EU (see the lists at the end of this Terminology section).

 The Northern Hemisphere

When we use the term “North” we mean the group of 86 countries identified by the World Bank as high-income economies, namely countries where the GDP per capita is over $14,006 per year.

The North thus includes Western European countries, Central and Eastern European countries that are members of the EU, the United States of America, Canada, Japan, South Korea, Australia, New Zealand, Russia and some 40 countries at various latitudes. Not all of these countries are “industrialized” in the sense that their economies comprise a significant manufacturing sector. Indeed, some of those countries are hardly industrialized at all, but they are regarded by international bodies as having achieved a high level of income either because they managed to attract foreign capital, notably through their status as tax havens (such as Panama, the Seychelles, the Bahamas and the Cayman Islands), or because they can rely on income from oil extraction (such as the Arab States of the Persian Gulf and Brunei in South-East Asia).

 Debt as an instrument of domination and dispossession

ABSTRACT

This section argues that the outcomes of debt crises are directed by big banks and the governments that support them. It begins with a historical overview of debt, providing a number of examples of imperial debt burdens during the late 1800s (Tunisia to France, Egypt to Britain, etc.), before considering debt relations in the post-colonial period in more detail. This section argues that the imposition of debt has been a central means by which imperial powers regained controlling influence over their former colonies following independence movements. Traversing the 1980s debt crisis and onwards through the 1990s-2000s to the 2008 Global Financial Crisis and the Covid-19 pandemic, it describes the looming debt crisis within the Global South, which began in 2016-2017 and has accelerated since. The chapter also summarizes the debt profiles of Africa and Latin America and the Caribbean, to reveal some of the detrimental development effects of debt repayments.

INTRODUCTION

Over the last fifteen years Greece has been a prime example of how a country and a people can be deprived of their liberty through clearly illegitimate debt. Since the 19^th century, from Latin America to China, Haiti, Greece, Tunisia, Egypt and the Ottoman Empire, public debt has been used as a coercive force to impose domination and pillage (Toussaint, 2019). The combination of debt and free trade constitute the fundamental factors subordinating whole economies as from the 19^th century. Through these two inter-related processes, local elites ally themselves with big financial powers in order to subject their own countries and peoples to methods of power that transfer wealth towards local and foreign creditors.

Contrary to commonplace ideas, it is generally not the indebted weaker countries that are the cause of sovereign debt Sovereign debt Government debts or debts guaranteed by the government. crises. These crises break out first in the biggest capitalist countries or are the result of their unilateral decisions that produce effects of great magnitude in indebted countries. It is not so-called “excessive” public spending that builds up unsustainable debt levels, but rather the conditions imposed by local and foreign creditors. Real interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation. are abusively high and so are bankers’ commissions. The indebted countries unable to keep up with repayments have to continually find new loans to repay old loans. In the past, when that became impossible, the great powers had license to resort to military action to ensure they were repaid. Today, debt crises and their outcomes are directed by the big banks and the governments that support them.

Over the last two centuries, several countries have successfully repudiated or unilaterally restructured debts by arguing that they were either illegitimate or odious. Portugal (1837), Mexico (1861, 1867, 1883, 1914, 1943), the USA (1837, 1865, 1898), Russia (1917-1918), Costa Rica (1919), Brazil (1931, 1946), Cuba (1909, 1934, 1959), China (1949), Indonesia (1956), Iran (1979), Paraguay (2005), Ecuador (2007-2009), Iceland (2008-2009) have all done this (Toussaint, 2019). Conflict involving debt non-payment has given birth to a judicial doctrine known as 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. which is still pertinent today (see box).

 HISTORICAL EXAMPLES

Debt was used to subjugate Tunisia to France in 1881 and Egypt to Britain in 1882

Creditors, whether powerful states, multilateral organizations that serve them, or banks, have become very adroit at imposing their will on debtors. From early in the 19^th century Haiti, the first independent black republic, was an early testing ground. The island gained freedom from the yoke of the French empire in 1804, but Paris did not abandon its claims on the country and obtained from Haiti payment of a royal indemnity granted to the former colonial slave owners. The 1825 agreements signed by the new Haitian leaders created a monumental debt of independence untenable from 1828, which took a full century to pay off, thus preventing any real development.

Debt was also used to subjugate Tunisia under France in 1881 and Egypt to the British in 1882. The lending powers used unpaid debt to impose their will on countries that had so far been independent. Greece too, was born in the 1830s with a burden of debt that held it in the sway of Russia, France and the British. Newfoundland, which had become the first autonomous dominion of the British Empire in 1855, well before Canada and Australia, had to renounce its independence in 1933 because of a grave economic crisis and, in order to face up to its debts, it was eventually incorporated into Canada in 1949. Canada agreed to take charge of 90 per cent of Newfoundland’s debt (Reinhardt and Rogoff, 2010).

 Debt during the 1960s and 1970s

Debt was the major instrument for imposing neo-colonial policies

Similar processes were again repeated after the Second World War, when Latin American countries sought capital to fund their development and Asian and African colonies gained independence. Debt became the principal instrument used to impose neocolonialist relations. It became frowned upon to use force against a debtor country, and new means of coercion had to be found.

The massive loans granted from the 1960s to an increasing number of peripheral countries (not least those in which the Western powers had a strategic interest such as Mobutu’s Congo, Suharto’s Indonesia, the military regimes in Brazil, Yugoslavia and Mexico) oiled a powerful mechanism that took back the control of countries that had begun to adopt policies that were independent of former colonial powers and Washington.

Three big players have incited post-colonial countries into debt by promising relatively low interest rates:
1. leading global (Western) banks seeking to put massive amounts of liquidities Liquidities The capital an economy or company has available at a given point in time. A lack of liquidities can force a company into liquidation and an economy into recession. to work;
2. industrialized countries seeking to stimulate their economies after the 1973 oil crisis and the world recession of 1973-1974; and
3. the World Bank seeking to increase US influence and to avoid being edged out by the increasing expansion of private banks.

Local elites in borrower countries also encouraged higher debt and made gains, contrary to the populations, who derived no benefit.

 The debt crisis of the 1980s and the imposition of adjustment programmes

The public debt of the countries of the “Third World” and the East increased twelvefold between 1968 and 1980

Beginning in the 1980s, public debt, both in the countries of the so-called “Third World” and in the most industrialized countries, has been systematically used to impose austerity policies in the name of “adjustment.” Accusing their predecessors of “living beyond their means” by relying too easily on loans, the majority of the governments in place function have imposed an adjustment of public expenditures, and in particular social expenditures, requiring the populations to tighten their belts.

For the “Third World” and the countries of Eastern Europe that were part of the Soviet bloc, the strong growth of public debt began in the late 1960s and led to a repayment crisis starting in 1982. As has been explained previously, the parties responsible for this indebtedness are known. They are to be found essentially in the most industrialised countries: the private banks, the World Bank and the governments of the North, who have literally churned out hundreds of billion of eurodollars and petrodollars [9] in loans.

A historical turning point was reached between 1979 and 1981 with the arrival in power of Margaret Thatcher in the UK and Ronald Reagan in the USA

To invest surplus capital and merchandise, and to encourage these countries to go into debt, the aforementioned players in the North granted loans at very low interest rates. The public debt of the countries of the Third World and Eastern Europe increased twelvefold between 1968 and 1980. In the most industrialized countries, public debt also greatly increased during the 1970s as governments attempted to deal with the end of the postwar boom years [10] using Keynesian policies to re-start the economic machinery.

A historical turning point was reached between 1979 and 1981 with the arrival in power of Margaret Thatcher in the UK and Ronald Reagan in the USA, who began putting in place on a large scale policies the neoliberals had only dreamed of before then. The USA immediately implemented a substantial increase in interest rates in order to slow inflation Inflation The cumulated rise of prices as a whole (e.g. a rise in the price of petroleum, eventually leading to a rise in salaries, then to the rise of other prices, etc.). Inflation implies a fall in the value of money since, as time goes by, larger sums are required to purchase particular items. This is the reason why corporate-driven policies seek to keep inflation down. and prevent a massive outflow of dollars. [11] This unilateral increase, imitated by numerous countries, forced indebted public authorities to transfer colossal amounts to private financial institutions and other holders of debt instruments. To refinance – that is, to take on a new loan in order to repay an earlier debt –, the governments of these countries were faced with outrageous interest rates.

Repayment of public debt was a powerful mechanism for pumping part of the wealth created by workers and small producers into the pockets of the wealthiest 10%

From that moment on, repayment of public debt became a powerful mechanism for pumping part of the wealth created by workers and small producers into the pockets of the wealthiest 10%, and capitalists in particular. These policies, dictated and imposed by the neoliberals, were the beginning of a major assault on workers by capital. Indebted governments began reducing social spending and public investment to “balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. ” their accounts; then they took on new loans in order to meet rising interest rates. This is the famous “snowball” effect, which consists in contracting new, costlier loans in order to repay earlier loans.

To repay public debt, governments make abundant use of taxes, whose structure was modified in a regressive way beginning in the 1980s–1990s. The 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 tax revenues from tax payments on revenue from capital decreased, while at the same time the share of tax revenues from taxes paid by workers, on the one hand, and taxes on mass consumption, via the generalisation of the value-added tax (VAT), increased.

In other words, the State took from workers and the “poor” to give to the “rich,” to capital—exactly the reverse of a policy of redistribution, in spite of the fact that such a policy should be the primary concern of the public authorities.

 The strategic importance of “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/ ” in the Periphery countries

Starting in the 1980s, “structural adjustment” policies began to be imposed through the IMF

While the IMF, the World Bank and the government of the USA at first denied the existence of a debt crisis, “structural adjustment” policies began to be applied above all starting with the late 1980s under the leadership of the IMF, which imposed its conditions in exchange for loans to indebted governments. These policies amounted to continuing, under a new form, the offensive that had begun during the previous decade with the policies instituted by the military dictatorships in Chile, Argentina, and Uruguay, among others.

For the strategists of the governments of the North and the multilateral financial institutions that serve them, beginning with the World Bank, a challenge needed to be met: the loss of control over a growing portion of the periphery. During the 1940s and through the 1960s, one country after another gained independence from the former European colonial powers, the Soviet bloc imposed its influence on Europe Eastern, the Chinese and Cuban revolutions triumphed, and populist and nationalist policies implemented by capitalist regimes in the periphery emerged—from Peronism in Argentina to Nehru’s Congress in India and including pan-Arabism under Nasser in Egypt. In short, new movements and organisations had developed all around the world, all of them representing dangers to the domination of the major capitalist powers in the context of a “Cold War” with the Soviet bloc.

“In many cases, the loans were meant to corrupt governments during the Cold War. The problem at the time was not whether the money was beneficial to the well-being of the country, but whether it led to a stable situation in the light of worldwide geopolitical realities.”

Joseph E. Stiglitz (Chief economist of the World Bank from 1997 to 1999, Nobel Prize in economics in 2001), in “L’Autre mondialisation,” Arte TV, 7 March 2000 (translation CADTM)

The massive loans granted to a growing number of Periphery countries starting in the 1960s (beginning with the strategic allies, Mobutu’s Congo, Indonesia under Suharto, Brazil, then under military dictatorship, and including countries such as Yugoslavia and Mexico) acted as the lubricant for a powerful mechanism designed to take back control. These targeted loans were aimed at forcing these countries to abandon their nationalist policies and strengthen the connection of the economies of the Periphery to the worldwide market dominated by the Centre. The purpose was also to ensure the supply of raw materials and fuel to the economies of the Centre. By gradually putting the Periphery countries in competition with one another, by inciting them to “strengthen their export model,” the goal was to lower the prices of the products they export and consequently to reduce production costs in the North and increase the rate of 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. there..

Admittedly, we cannot go so far as to say that this amounted to a conspiracy on the part of the private banks, the World Bank and the governments of the North. Yet an analysis of the policies of the World Bank and the governments of the major industrialised countries as regards loans to the periphery demonstrates that those policies were not devoid of strategic intent. [12]

 The 1982 crisis

The crisis that broke out in 1982 was the result of the combined effect of the drop in the prices of products exported by the periphery countries to the worldwide market and the explosion of interest rates. Overnight, more had to be paid back with revenues that were decreasing. The result was strangulation. The indebted countries announced that they were experiencing difficulties with payment. The private banks in the centre immediately refused to grant new loans and required that the old ones be reimbursed. The IMF and the major industrialised capitalist countries extended new loans so that the private banks could recoup their investments and to prevent a succession of bank failures.

“The Latin American debt crisis in the 1980s was brought about by the huge increase in interest rates, a result of Federal Reserve FED
Federal Reserve Officially, Federal Reserve System, is the United States’ central bank created in 1913 by the ’Federal Reserve Act’, also called the ’Owen-Glass Act’, after a series of banking crises, particularly the ’Bank Panic’ of 1907.

FED – decentralized central bank : http://www.federalreserve.gov/ Chairman Paul Volcker’s tight money policy in the United States.”
Joseph Stiglitz, Globalization and Its Discontents, 2002

Since that period the IMF, with the support of the World Bank, has imposed “structural adjustment” plans. An indebted country that refuses the structural adjustment is threatened with suspension of loans from the IMF and the governments of the North. We can now say without fear of contradiction that those who were proposing back in 1982 that the Periphery countries cease repaying their debts and create a united front of debtor countries were right. Had the countries of the South created such a front, they would have been in a position to dictate their own conditions to the creditors, whose backs were to the wall.

By choosing the path of repayment and putting themselves at the mercy of the IMF, the indebted countries transferred the equivalent of several Marshall Plans [13]] to the financial capitals of the North. In submitting to the adjustment policies, they gradually abandoned key elements of their national sovereignty; for these countries that has meant greater dependence on the industrialised countries and their multinationals. None of the countries who have applied structural adjustment policies has been able to sustain a high level of growth. In all of them, social inequalities have increased. Not a single “adjusted” country has escaped.

The IMF’s adjustment programmes pursue three goals: 1) ensure the reimbursement of the debts contracted; 2) implement structural reforms aimed at liberalising the economy, opening it to the international markets, and reducing the presence of the State; 3) gradually make it possible for the indebted countries to have access to private loans via the financial markets, while still remaining indebted.

 Just what does this “adjustment” consist of?

Structural adjustment comprises two main types of measures:

• The first are macroeconomic stabilisation measures that are traditionally included in the conditions imposed by the IMF. They amount to shock therapy (generally, devaluation Devaluation A lowering of the exchange rate of one currency as regards others. of the currency and raising of internal interest rates in the countries concerned).
• The second are structural reforms (privatisation, tax reform, etc.)

 Here are a few examples of some of these policies:

Currency devaluations are aimed at making exports from the countries more competitive (as a result of the reduction in the value of the local currency compared to other currencies) so as to increase the flow of hard currency needed for repaying debt. Another advantage, and not a negligible one from the point of view of the interests of the IMF and the industrialised countries, is that they bring about a reduction in the price of the products exported by the countries of the South.

For the latter, they also have deleterious effects—they cause an explosion in the prices of products imported onto their own market, and at the same time have a negative impact on internal production. Thus, not only do their production costs increase, both for agriculture and for industry and crafts—all the more since they now incorporate numerous imported inputs due to the abandonment of “self-reliance” policies—, but the purchasing power of the great mass of consumers stagnates or erodes (since the IMF prohibits any indexing of wages).

Other adjustment measures specific to the Periphery countries are the removal of subsidies on certain basic goods and services like bread and rice

Regarding the debt itself, since the value of revenues (in the local currency) decreases as that of the loans increases vis-à-vis the exterior (in hard currency, which has now become more expensive), the actual amount of the debt increases.

The policy of high interest rates does nothing but increase the internal recession—the farmer or craftsman who needs to borrow in order to purchase the inputs he/she needs in order to produce can no longer do so because of the increased cost of credit. Rentier capital, on the other hand, prospers. The IMF justifies these high interest rates by claiming that they will attract the foreign capital the country needs. In practice, the capital that is attracted by such rates is volatile and disappears at the first sign of a problem or as soon as a better prospect for profit appears somewhere else.

Other adjustment measures specific to the Periphery countries are the removal of subsidies on certain basic goods and services and agrarian counter-reform. In most countries of the Third World, the staple food (bread, corn tortillas, rice, etc.) is subsidised so as to protect against large price increases. Public transportation, electricity, and water also often receive such subsidies. The IMF and the World Bank systematically require that such subsidies be removed, which results in the impoverishment of the poorest segment of the population, and has on a few occasions resulted in food riots.

Regarding land ownership, the IMF and the World Bank have launched a long-term offensive aimed at causing the disappearance of any form of community property

Regarding land ownership, the IMF and the World Bank have launched a long-term offensive aimed at causing the disappearance of any form of community property. For example, they succeeded in obtaining the modification of the article of the Mexican Constitution that protects communal lands (called ejido). And one of the major projects the two institutions are currently devoting their energies to is the privatisation of communal or state lands in sub-Saharan Africa. In recent years, the takeover of land by major foreign corporations has accelerated thanks to the support of the World Bank and the IMF. Today, dispossession of land for the benefit of major private companies has been ramped up another notch under the pretext of projects for reducing carbon emissions into the atmosphere. For example Blue Carbon, a private company based in the United Arab Emirates (who hosted the COP 28 in December 2023), managed to get the government of Liberia in Western Africa to give over 10% of the country’s forests under the pretence of preserving Nature. [14] This is in fact a way of taking possession of and commodifying land under the pretext of creating a source of carbon absorption. As a result, the land is no longer available for local subsistence agriculture and is taken from the control of the local population.

 Adjustment measures that are common to the North and South

Structural adjustment plans and other austerity schemes are a war machine aimed at destroying all mechanisms of group solidarity and reducing all areas of human life to the level of commodities Commodities The goods exchanged on the commodities market, traditionally raw materials such as metals and fuels, and cereals.

Reducing the role of the public sector in the economy, reducing social expenditures, privatisations, tax reform that favours capital, deregulation of the labour market, the abandonment of essential aspects of state sovereignty, the removal of controls on foreign exchange, stimulating investment-based retirement plans, deregulation of commercial exchanges, encouragement of stock-market Stock-exchange
Stock-market The market place where securities (stocks, bonds and shares), previously issued on the primary financial market, are bought and sold. The stock-market, thus composed of dealers in second-hand transferable securities, is also known as the secondary market. operations, etc.: all these measures are applied around the world in varying doses depending on the relative strength of labour movements. What is striking is that from Mali to Greece, from Spain to Brazil, from France to Thailand, from the USA or Belgium to Russia, we observe a profound similarity and complementarity between so-called “structural adjustment” policies in the countries of the Global South and what are called “austerity” or “convergence” policies in the countries of the North.

Everywhere, the public-debt crisis, or at the very least a strong increase in public indebtedness, pulls people into the cogs of an infernal mechanism for transferring wealth to the holders of capital.

François Chesnais of ATTAC France summed up the situation in a few sentences:

“The markets for public-debt securities (public bond Bond A bond is a stake in a debt issued by a company or governmental body. The holder of the bond, the creditor, is entitled to interest and reimbursement of the principal. If the company is listed, the holder can also sell the bond on a stock-exchange. markets), put in place by the major countries who benefit from financial globalization and imposed on the other countries (most often without much difficulty), are, in the words of the International Monetary Fund itself, the “cornerstone” of financial globalization. Translated into understandable language, this means very precisely that through financial liberalisation, a powerful mechanism has been put in place for transferring the wealth of certain classes and social strata and of certain countries to other countries and classes. Attacking the foundations of the power of finance presupposes dismantling that mechanism, and therefore cancelling public debt—not only that of the poorest countries, but also of all countries whose vital social forces refuse to allow governments to continue to impose budgetary austerity on the citizens on the pretext of paying interest on public debt.”  [15]

Structural adjustment plans and austerity plans are two components of a war machine aimed at destroying all mechanisms of collective solidarity (from community property to the distributive pension system) and subjecting all areas of human activity to the logic of the market.

The true underlying meaning of structural adjustment policies is the systematic suppression of all historical and social obstacles giving capital free rein in its logic of immediate profit regardless of the human or environmental cost.

 Changes between the late 1990s and 2024:

The government of Ecuador took a remarkable and very positive initiative in 2007-2008 by conducting, with the active participation of delegates from social movements, a complete audit of the country’s debt

Many changes have taken place between the late 1990s and 2020. We will mention thirteen of them:

1) Several developing countries have distanced themselves from neoliberalism. In the late 1990s and in the early 2000s, after more than twenty years of neoliberal and thanks to major popular mobilizations, several Latin America peoples rid themselves of neoliberal presidents and elected heads of state who implemented policies more in line with the people’s interests; this has been the case in Venezuela, Bolivia and Ecuador. The government of Ecuador took a remarkable and very positive initiative in 2007-2008 by conducting, with the active participation of delegates from social movements, a complete audit of the country’s debt. [16] Based on that audit, reimbursement of a portion of the debt identified as being illegitimate was suspended and the creditors were required to agree to a large reduction of the debt. [17] This made possible a strong increase in social spending. In another positive move, the governments of these three countries also increased the taxes levied on the revenues of the large private foreign companies who exploit their natural resources. This greatly increased tax revenues and enabled increases in social expenditures.

The citizens of these three countries adopted, via the democratic process, new Constitutions which provide for the revocability of all mandates of elected representatives at mid term. [18]]

We should add that Bolivia, Ecuador and Venezuela have made the very wise decision of withdrawing from the International Centre for Settlement of Investment Disputes (ICSID ICSID The International Centre for the Settlement of Investment Disputes (ICSID) is a World Bank arbitration mechanism for resolving disputes that may arise between States and foreign investors. It was established in 1965 when the Washington Convention of that year entered into force.

Contrary to some opinions defending the fact that ICSID mechanism has been widely accepted in the American hemisphere, many States in the region continue to keep their distance: Canada, Cuba, Mexico and Dominican Republic are not party to the Convention. In the case of Mexico, this attitude is rated by specialists as “wise and rebellious”. We must also recall that the following Caribbean States remain outside the ICSID jurisdiction: Antigua and Barbuda, Belize, Dominica (Commonwealth of) and Suriname. In South America, Brazil has not ratified (or even signed) the ICSID convention and the 6^th most powerful world economy seems to show no special interest in doing so.

In the case of Costa Rica, access to ICSID system is extremely interesting: Costa Rica signed the ICSID Convention in September, 1981 but didn’t ratify it until 12 years later, in 1993. We read in a memorandum of GCAB (Global Committee of Argentina Bondholders) that Costa Rica`s decision resulted from direct United States pressure due to the Santa Elena expropriation case, which was decided in 2000 :
"In the 1990s, following the expropriation of property owned allegedly by an American investor, Costa Rica refused to submit the dispute to ICSID arbitration. The American investor invoked the Helms Amendment and delayed a $ 175 million loan from the Inter-American Development Bank to Costa Rica. Costa Rica consented to the ICSID proceedings, and the American investor ultimately recovered U.S. $ 16 million”.

https://icsid.worldbank.org/apps/ICSIDWEB/Pages/default.aspx ), the World Bank’s tribunal. [19]] We might also mention the exchange agreements between Chávez’s Venezuela and Cuba involving Cuban providing medical services in exchange for Venezuelan oil.

In December 2007 the founding document of the Bank of the South (Banco del Sur) was signed by the heads of state of Argentina, Bolivia, Brazil, Ecuador, Paraguay, Uruguay and Venezuela. Unfortunately, the Bank of the South never actually came into being [20]] and from the 2010s, various interesting initiatives and several concrete achievements gradually came to an end due to a lack of cohesion, coordination and political will on the part of progressive governments.

2) Increases in the prices of raw materials and currency reserves. Starting with 2003-2004, the prices of raw materials and agricultural products began to increase in a context of strong international demand. This enabled the countries who export such products to increase their revenues, especially in strong currencies (dollar, euro, yen, pound sterling). Certain developing countries used this opportunity to increase social spending, while the majority invested this revenue in purchases of US Treasury Bonds—thus contributing to financing the leading world power. In other words, they increased their loans to the world’s principal economic power, thus contributing to maintaining its domination by providing it with the means to continue living on credit and maintaining a large trade deficit.

3) The loss of power of the World Bank and IMF in certain developing countries for a short period between 2005 and 2009. The increase in the resources of certain countries as a result of the increase in currency revenues and the affluence of private investors before the outbreak of the crisis of 2007-2008 reduced the influence of the two multilateral institutions. Between 2005 and 2008, several countries anticipated their repayments to the IMF in order to recover more of their freedom. Brazil and Argentina are two examples. This loss of influence also comes from the fact that China (see the following two points) and the other BRICS countries (Brazil, Russia, India, China, South Africa) have greatly increased the number of loans to certain developing countries.

4) The arrival of China on the world stage as a creditor country. Another factor has reinforced this phenomenon: a rapidly expanding China has become the world’s workshop and has accumulated huge currency reserves (most of all in dollars). It has significantly increased its financing of developing countries. Its loans are now competing with those of the multilateral financial institutions and the countries of the North. That has reduced the ability of these institutions and of the North to exert pressure on a certain number of developing countries. However, we should remain vigilant regarding these new debts. China does not give anything away, and its investments are aimed at ensuring control over the raw materials it needs. Its aim is also, through an enormous worldwide programme of investment called the New Silk Road or Belt and Road Initiative (BRI), to strengthen its position as a world economic power.

5) In 2014 the BRICS countries (Brazil, Russia, India, China, South Africa) announced the creation of a multilateral bank which will belong to them. [21] Called the New Development Bank (NDB), it granted its first credits at the end of 2016. An analysis of the projects financed by this Bank, whose headquarters is in Shangai, indicates that they are not fundamentally different from the ones financed by the World Bank and other financial institutions such as the African Development Bank (AfDB, the Asian Development Bank (ADB), the Inter-American Development Bank (IDB) or the European Investment Bank (EIB). They all exist within the productivist-extractivist-exportation model: building major roads and other infrastructures intended for importation/exportation of raw materials extracted from countries that are not highly industrialized without processing within the country; building large power plants to produce the energy necessary for extraction of said raw materials, and so on. Unfortunately, the new development is not a true positive alternative for developing countries, because the governments that took part in founding it are seeking a bank that will directly serve their interests (that is, ensuring sources of raw materials and outlets for exporting them) and not the interest of the peoples of these countries.

6) The food and climate crisis. In 2007–2008, the people of the countries of the South faced a dramatic increase in the price of food. This situation resulted in food riots in 18 countries. The number of persons suffering from hunger, which stood at approximately 900 million before the crisis, increased by nearly 120 million. In other words, the number crossed the line of 1 billion in 2009. As we shall see, that figure has been gradually reduced, but the alert as to the incredible vulnerability of hundreds of millions of human beings has been raised. The dramatic situation is directly related to other factors of the global crisis and the debt system. [22]] Among the factors related to the global food crisis, in which approximately one person in ten suffers from hunger, are financial speculation on the prices of basic food items; the use of land for producing agrofuels instead of food; the priority given to monocultures for exportation; and the end of subsidies for ensuring supplies of food grown and raised by local producers.

Added to that are the effects of the climate crisis, which are becoming worse in the developing countries. There again, the policies pushed by the World Bank in particular, and the productivist capitalist system in general, are part of the problem and not of the solution. [23]]

7) Increases in internal public debt. Slowly but inexorably, internal creditors have been added to external ones. Payments no longer end up in bank accounts in New York, London, or Paris, but in banks within the countries of the South themselves. But we should not be fooled. Often the domestic banks that issue loans to the public authorities of their country in the local currency are in fact subsidiaries of foreign banks, and the loans in local currency, in many cases, are indexed to a strong currency (generally the dollar). This means that if the local currency is devalued or the value of the strong currency increases, the amount to be reimbursed increases considerably. The apparent transformation has not changed the fundamental situation: resources which should be used first of all to meet fundamental social needs are devoted to repaying debts which in many cases are illegitimate or illegal.

8) Public debt has become one of the major concerns of the countries of the North since the crisis caused by the big private banks in 2007–2008. In the USA and Europe in particular, [24] it generated a strong increase in private debt, and then in public debt. The lessons learned from the Third World debt crisis are very valuable for analysing the events that followed the crisis of 2007-2008. The policies applied to the North in countries like Greece, Portugal and Cyprus closely resemble those that have impacted the countries of the South since the 1980s. That is why the CADTM has reinforced its analytical work and its actions concerning the countries of the North, while still not neglecting the South.

9) Since 2010–2012, the gradual reduction in interest rates in the North has reduced the cost of the debt in the South. The central banks of the North lowered interest rates to 0%. That policy was aimed at keeping the financial markets and the major corporations afloat. Another purpose was to make public debt in the North easier to manage and to re-finance. This policy of very low rates conducted by the major capitalist powers encouraged financing of expenditures using debt and resulted in a very significant increase in public and private debts in the North and in the South. It also lowered the cost of refinancing for the countries of the South. This low-cost financing, combined with an influx of capital from the North for seeking better yields faced with the low interest rates in the North, and high revenues from exportation (since the price of raw materials exported from the South to the North remained high), gave the governments of the developing countries, including the poorest ones, a dangerous sense of security. Poor countries of sub-Saharan who never had the opportunity to print and sell sovereign-debt securities on the international financial markets easily found purchasers for those securities. The investment funds Investment fund
Investment funds Private equity investment funds (sometimes called ’mutual funds’ seek to invest in companies according to certain criteria; of which they most often are specialized: capital-risk, capital development funds, leveraged buy-out (LBO), which reflect the different levels of the company’s maturity. and banks of the North purchased these securities from the South because they offered a higher yield Yield The income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value. than US Treasury notes or Japanese, German, French or other European securities, all of which have yields of close to 0%, or at most less than 2 to 3%.

10) The poorer countries have had no difficulty issuing and selling securities on their external on the international markets. Rwanda is an emblematic case. Although it is one of the poorest countries on the planet – ranked 165^th of 191 countries by the United Nations Development Program (UNDP UNDP
United Nations Development Programme The UNDP, founded in 1965 and based in New York, is the UN’s main agency of technical assistance. It helps the DC, without any political restrictions, to set up basic administrative and technical services, trains managerial staff, tries to respond to some of the essential needs of populations, takes the initiative in regional co-operation programmes and co-ordinates, theoretically at least, the local activities of all the UN operations. The UNDP generally relies on Western expertise and techniques, but a third of its contingent of experts come from the Third World. The UNDP publishes an annual Human Development Report which, among other things, classifies countries by their Human Development Rating (HDR).

) on its Human Development Index (HDI) [25] – and was devastated by the genocide of 1994, for the first time in its existence Rwanda has been able to issue sovereign-debt securities and sell them on Wall Street. This was done in 2013, 2019, 2020 and 2021. The same goes for Senegal which made six international bond issues between 2009 and 2021 in 2009, 2011, 2014, 2017, 2018 and 2021. Ethiopia, another extremely poor country, issued international bonds in 2014. Benin had access more recently and has made three bond issues on the international markets – in 2019, 2020 and 2021. Ivory Coast, which emerged from a civil war only a few years ago, also issued securities each year from 2014 to 2021, whereas it too is among the Heavily Indebted Poor Countries Heavily Indebted Poor Countries
HIPC In 1996 the IMF and the World Bank launched an initiative aimed at reducing the debt burden for some 41 heavily indebted poor countries (HIPC), whose total debts amount to about 10% of the Third World Debt. The list includes 33 countries in Sub-Saharan Africa.

The idea at the back of the initiative is as follows: a country on the HIPC list can start an SAP programme of twice three years. At the end of the first stage (first three years) IMF experts assess the ’sustainability’ of the country’s debt (from medium term projections of the country’s balance of payments and of the net present value (NPV) of debt to exports ratio.
If the country’s debt is considered “unsustainable”, it is eligible for a second stage of reforms at the end of which its debt is made ’sustainable’ (that it it is given the financial means necessary to pay back the amounts due). Three years after the beginning of the initiative, only four countries had been deemed eligible for a very slight debt relief (Uganda, Bolivia, Burkina Faso, and Mozambique). Confronted with such poor results and with the Jubilee 2000 campaign (which brought in a petition with over 17 million signatures to the G7 meeting in Cologne in June 1999), the G7 (group of 7 most industrialised countries) and international financial institutions launched an enhanced initiative: “sustainability” criteria have been revised (for instance the value of the debt must only amount to 150% of export revenues instead of 200-250% as was the case before), the second stage in the reforms is not fixed any more: an assiduous pupil can anticipate and be granted debt relief earlier, and thirdly some interim relief can be granted after the first three years of reform.

Simultaneously the IMF and the World Bank change their vocabulary : their loans, which so far had been called, “enhanced structural adjustment facilities” (ESAF), are now called “Growth and Poverty Reduction Facilities” (GPRF) while “Structural Adjustment Policies” are now called “Poverty Reduction Strategy Paper”. This paper is drafted by the country requesting assistance with the help of the IMF and the World Bank and the participation of representatives from the civil society.
This enhanced initiative has been largely publicised: the international media announced a 90%, even a 100% cancellation after the Euro-African summit in Cairo (April 2000). Yet on closer examination the HIPC initiative turns out to be yet another delusive manoeuvre which suggests but in no way implements a cancellation of the debt.

List of the 42 Heavily Indebted Poor Countries: Angola, Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Comoro Islands, Congo, Ivory Coast, Democratic Republic of Congo, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Honduras, Kenya, Laos, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nicaragua, Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda, Vietnam, Zambia. . We might also mention the bond issues by Kenya (2014, 2018, 2019, 2021), Zambia (2012, 2014, 2015), Ghana (2013 to 2016 and 2018 to 2021), Gabon (2007, 2013, 2015, 2017, 2020, 2021), Nigeria (2011, 2013, 2014, 2017, 2018, 2021, 2022), Angola (2015, 2018, 2019, 2022) and Cameroon (2014, 2015 and 2021). This has been unheard of for the past 60 years. This is evidence of a highly unusual international situation: financial investors in the North have enormous amounts of cash, and in response to the very low interest rates in their own region, they are on the lookout for higher yields. Senegal, Zambia and Rwanda promised a yield of 6 to 8% on their bonds. As a result, they attracted financial companies seeking to invest their cash temporarily even if the risks were high. The governments of the poor countries became euphoric and attempted to convince their populations that happiness was just around the corner, whereas in reality the situation could reverse itself dramatically. The international press talked about “Afro-Optimism” coming after the earlier “Afro-pessimism.” [26] African leaders boasted of a supposed success story which they ascribed to their talent for adapting to neoliberal globalization and the opening up of markets. The World Bank, the IMF and the African Development Bank (AfDB) congratulated them. But in fact, these government leaders accumulated extravagant amounts of debt without any input from the citizens of their countries. Then when the central banks decided to increase interest rates starting in 2022, the financial situation began careening downhill.

11) Individual illegitimate debts. This is a new field of analysis and intervention that the CADTM has been developing since 2014. Like peoples collectively, individuals in the working classes also suffer from the “debt system” — indebted farmers in India [27] who commit suicide; 12 million families evicted from their homes by the banks in the USA after the 2007-2008 financial crisis, and hundreds of thousands in Spain and Ireland, among other countries; women trapped in the micro-credit system in the South, like the case of the indebted women in Morocco [28] ; university students in the USA, the UK, Japan and Chile who are over-indebted simply because they have continued their studies. Student debt in the USA is in excess of 1,750 billion dollars. [29] That figure is greater than the total cumulative external public debt of Latin America and Africa. Resistance movements have developed in recent years—in the USA to defend indebted students victimised by banks; in Spain and the USA to prevent foreclosures; in Morocco and in Sri Lanka to support the struggle of women who are victims of micro-credit fraud; in India, to protect farmers who are victimised by moneylenders, and so on.

12) The vulture funds Vulture funds
Vulture fund Investment funds who buy, on the secondary markets and at a significant discount, bonds once emitted by countries that are having repayment difficulties, from investors who prefer to cut their losses and take what price they can get in order to unload the risk from their books. The Vulture Funds then pursue the issuing country for the full amount of the debt they have purchased, not hesitating to seek decisions before, usually, British or US courts where the law is favourable to creditors. .  [30] Public debt has become the target of the speculative strategies of “litigating creditors,” known as “vulture funds.” These are private investment funds, most of them located in tax havens, who specialise in buying up debt securities from States that are in default or on the verge of default. They then bring suit against these States in the courts in the English-speaking countries, demanding that they reimburse their debt at its nominal value, with the addition of interest, penalties for late payment, and court costs. Unlike traditional creditors, they refuse to participate in any negotiation and restructuring operation and instead use legal tactics, and in case of non-payment, seizure of debtors’ assets (diplomatic properties, revenues from exports, and various assets invested abroad). Since the 2000s, some twenty States that are among the most heavily indebted on the planet have fallen prey to these strategies, in South America (Argentina, Honduras, Peru, Cuba), Africa (Sierra Leone, Republic of the Congo, Uganda, Democratic Republic of Congo) and in Asia (Sri Lanka) in the course of major legal-financial battles that are still unresolved today. Since 2007 the scheme has targeted countries in Southern Europe too (Greece, Spain, Portugal). In the future, vulture strategies are likely to prosper both in the South and in the North. Newly issued debts continue to be placed under American or British law, which is favourable to creditors. This enables the vulture funds to drag sovereign countries into the courts of the State of New York or the UK, where the cases are very likely to be decided in their favour. Argentina, for example, was in the spotlight in 2014, when the Supreme Court of the United States rejected the Argentine government’s appeal and found in favour of the vulture funds NML (owned by Paul Singer) and Aurelius, forcing Argentina to pay them a colossal amount. Finally in 2016, Argentina, under the presidency of the neoliberal Mauricio Macri, paid the extravagant sum of 9.3 billion dollars, including 4.8 billion to Paul Singer’s vulture fund. [31] Thanks to the work of the CADTM and other organizations, such as the Centre National de Coopération au Développement (CNCD) and its Flemish counterpart NCOS, in 2015 the Belgian legislature adopted an anti-vulture fund law. [32] Here is an excerpt from what Giselle Datz, author of an in-depth study of the issue, has to say about it:

(…) in July, 2015, the Belgian House of Representatives unanimously passed its “anti-vulture funds” law (…). The bill’s draft of April 2015 cites several cases of vulture fund-driven litigation in foreign courts as its motivation: Elliott Associates v. Peru in Belgium (1996–99), Kensington International v. the DRC in Belgium (cited above), FG Hemisphere v. the DRC in a Jersey Court in 2004, Donegal International v. Zambia in British courts (2007), and, of course, NML v. Argentina in New York courts (with critical judicial decisions stated in 2008 and 2012). The law established that “if a Belgian court finds a fund acting as a “vulture,” the latter cannot claim more than the discounted price it paid.” (Datz in Pénet and Zendejas, [33] p. 272)

The law was challenged before Belgium’s Constitutional Court by one of the biggest vulture funds on the planet, mentioned above: NML Capital Ltd. owned by the American Paul Singer. The CADTM, in association with the CNCD, took legal action and succeeded in having NML Capital’s appeal thrown out and confirmed the validity of the 2015 law. [34] Datz writes about this:

Finally, on 31 May 2018, the Belgian Constitutional Court put to rest NML Capital’s claims that the 2015 Belgian law was unconstitutional. Rather, the Court saw the law as “non-discriminatory, respectful of Belgium’s EU and international commitments and not in violation of any constitutional right.” This was a victory for the supporting public and, in particular, for the NGOs that joined the Belgium state litigating in support of the law: the Belgian coalition of French-speaking development NGOs, CNCD-11.11.11, its Flemish sister organization 11.11.11, and the Committee for the Abolition of Illegitimate Debt (CADTM, 2018). (Datz, p. 273).

Since then the CADTM has continued a campaign to encourage other countries to adopt anti-vulture-fund legislation along the lines of Belgium’s.

13) Citizen audits. In recent years, movements have developed to work towards conducting a citizen audit to identify illegitimate, odious or illegal debts. These movements in several countries provide an opportunity for interesting and enriching reflection to clarify which parts of public debt should not be paid. With no pretence at being exhaustive, we can propose the following definitions:

a) Illegitimate public debt: debt contracted by the public authorities without concern for the general interest or in such a way as to be detrimental to it.
b) Illegal public debt: debt contracted by the public authorities in flagrant violation of the prevailing legal order.
c) Odious public debt: credits extended to authoritarian regimes or which impose conditions for reimbursement which violate fundamental social rights.

“the purpose which the former government wanted to cover by the debt in question was odious and clearly against the interests of the population of the whole or part of the territory, and b) the creditors, at the moment of the issuance of the loan, were aware of its odious purpose.” (Sack, 1927)

d) Unsustainable public debt: debt whose reimbursement condemns the population of a country to impoverishment and deterioration of health and public education, increased unemployment, or problems of malnutrition. In other words, a debt whose reimbursement makes it impossible for the public authorities to guarantee fundamental human rights.

A citizen audit of public debt, combined in certain cases with unilateral sovereign suspension of its repayment, can enable the illegitimate, unsustainable, and/or illegal part of the debt to be abolished/repudiated and the remaining part to be greatly reduced. It is also a way of discouraging this type of indebtedness in the future.

Citizen debt-audit initiatives were particularly active in countries including Brazil (since 2000), Argentina (2018-2022), Portugal (2010-2011), France (2011-2014), Greece (2011-2015), Spain (2010-2018), Italy (2013-2017) and Belgium (2013-2016), and have had a decline in Europe after the capitulation of the Greek government of Tsipras in 2015.

 From the 2020s, the downward spiral towards another major debt crisis

Since 2020 and especially 2022, we have been in a new situation, a new debt crisis of enormous proportions caused by four shocks to global capitalism. These are all shocks that are exogenous to the poorest countries.

1- Firstly, the coronavirus pandemic, which has caused massive deaths around the world, widespread lockdowns, disruption of supply chains and so on.
2- Secondly, the economic crisis exacerbated by the pandemic. It has undermined the economies of developing countries, from Latin America to Asia and Africa. The suspension of air travel notably hurt nations like Cuba and Sri Lanka, whose economies relied heavily on tourism.

The present sovereign debt crisis was brought about by the combination of these two shocks. Governments had to raise public spending to combat the pandemic, but at the same time, their economies entered recessions, which reduced tax collections. Thus, sovereign debt skyrocketed.

3- The third shock was Russia’s invasion of Ukraine in February 2022. This immediately triggered massive speculative rises in the price of cereals such as wheat. Given that grain stocks in Russia and the Ukraine did not decline during the early months of the conflict, we may reasonably refer to a speculative rise. Grain costs skyrocketed. After that, exports were banned, which reduced supply and raised prices even further until a deal was made to let shipments to start again. Along with oil and gas, the cost of chemical fertilisers has also increased. Globally, prices have skyrocketed, especially in nations where the majority of food, fuel, and fertiliser are imported. The populations of Asian and African nations that were already severely impacted by the recession bore the brunt of inflation. A significant number of people found it difficult to keep up with the growing costs of fuel and food.

4- The fourth and certainly most important shock was the unilateral decision taken in 2022 by the US Federal Reserve, the European Central Bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

ECB : http://www.bankofengland.co.uk/Pages/home.aspx and the Bank of England to raise interest rates. In the United States, the Fed raised rates from close to 0% to over 5%, the Bank of England and the Bank of Canada followed suit, while the European Central Bank ECB
European Central Bank The European Central Bank is a European institution based in Frankfurt, founded in 1998, to which the countries of the Eurozone have transferred their monetary powers. Its official role is to ensure price stability by combating inflation within that Zone. Its three decision-making organs (the Executive Board, the Governing Council and the General Council) are composed of governors of the central banks of the member states and/or recognized specialists. According to its statutes, it is politically ‘independent’ but it is directly influenced by the world of finance.

https://www.ecb.europa.eu/ecb/html/index.en.html raised rates to 4.5%.

These increases have had a devastating effect on the countries of the South. Countries such as Zambia and Ghana, which were considered to be success stories, went into suspension of payments. Investment funds, which had bought sovereign bonds in these countries, realised that the rise in interest rates in the North meant that they could obtain a higher rate of return by buying such bonds in the United States, Europe and Great Britain. Thus, we witnessed a financial capital repatriation from the South to the North.

Following the increase in interest rates decided upon by the North, the investment funds told the States of the South that if they want to refinance their debt, they will have to pay interest rates of from 7 to 15%, and in some cases as high as 26%

Worse still, the investment funds told the countries of the South that if they wanted to refinance their debt, they would have to pay interest rates of between 7% and 15%, and in some cases as high as 26% (as in the case of Zambia and Egypt [35]), failing which the funds would not buy their bonds. While the countries had no choice but to accept, many of them have no way of making their payments at such high rates. The result is another sovereign debt crisis.

The World Bank’s report on the debt of “developing countries,” published in December 2023, [36] revealed an alarming fact: in 2022, developing countries as a whole spent a record US$ 443.5 billion to pay for their external public debt. The 75 low-income nations that are eligible for loans from the International Development Association (IDA), a World Bank organization that provides loans to the world’s poorest nations, paid a record US$ 88.9 billion to its creditors in the same year, 2022. These 75 nations have an unprecedented total external debt of US$ 1,100 billion, which is more than twice as much as it was in 2012. As per the press release from the World Bank, the nations in question experienced a 134% increase in their foreign debt between 2012 and 2022, which was greater than the 53% increase in their gross national income (GNI).

It is the first time since 2015 that private creditors received more funds than they paid out in the developing countries

The World Bank added: “Surging interest rates have intensified debt vulnerabilities in all developing countries. In the past three years alone, there have been 18 sovereign defaults in 10 developing countries—greater than the number recorded in all of the previous two decades. Today, about 60 percent of low-income countries are at high risk of debt distress or already in it.”

As a result, the World Bank sounded the alarm: a new debt crisis has begun. Enormous sums are being expended to repay creditors at the expense of meeting the increasing needs of hundreds of millions of people who are in dire need of aid. According to another WB report cited by the Financial Times, [37] between 2019 and 2022, over 95 million more people fell into extreme poverty.

The World Bank acknowledges that in 2022 private lenders began to turn off the tap of credit to developing countries, while squeezing the lemon to get the most repayments. In fact, according to the WB, new loans granted by private lenders to public authorities in developing countries fell by 23% to 371 billion dollars, their lowest level in ten years. On the other hand, these same private creditors collected $556 billion in repayments. This indicates that they collected $185 billion more in loan repayments in 2022 than they disbursed. According to the World Bank, this is the first time since 2015 that private creditors have received more funds than they injected into developing countries.

The World Bank does not provide an explanation for this since doing so would require questioning the economic model and system that it supports and believes to be the only viable choice. It would also entail unmistakably placing the blame at the feet of the Western European and North American central banks, and consequently at the hands of the leaders of the main Western powers that control the World Bank and the IMF.

Over the past three years, there have been 18 sovereign payment defaults in ten developing countries, or more than the number recorded over the preceding two decades

The World Bank does not deny the extremely negative impact of the surge in interest rates, but is careful not to point the finger at the responsibility of the heads of the central banks of the countries that dominate the two Bretton Woods institutions.

The World Bank does not recommend that governments of indebted countries protect themselves by declaring a co-ordinated suspension of repayment of their debts. Yet, according to international law, they would be perfectly within their rights in doing so. They could cite the fundamental change in circumstances caused by the external shocks coming from the North, and in particular the unilateral decision by the central banks in North America and Western Europe to radically increase interest rates.

In case of a fundamental change in circumstances and/or external shocks, there is no obligation to continue execution of a loan contract and repayment of the debt.

Meanwhile, the World Bank also does not fulfil its responsibilities. The Bank and the IMF encourage countries who are currently in debt to contract a maximum number of new loans and open up their economies as much as possible, which has made them more vulnerable to the external shocks that have come one after another over the past three years.

Between 2019 and 2022, more than 95 million more people fell into extreme poverty

If we adopt a long-term perspective and evaluate the operations of the World Bank and the IMF, which were established in 1944 – 80 years ago – we can only come to the conclusion that these two international organizations, whose purported goal was to support stable development and full employment, have entirely failed. A significant study that the IMF released in 2023 admits failure with devastating clarity. In its April 2023 World Economic Outlook, the IMF states that it will take 130 years for developing countries to halve the gap between their per capita income and that of developed countries. 130 years to halve the gap between developing countries’ per capita income and that of rich countries! This comes at a time when humanity is facing immediate, shorter-term threats to its existence, due to the ecological crisis that has reached extreme proportions. But believe it or not, in its April 2008 World Economic Outlook the IMF had estimated that it would take 80 years to close that same income gap. The conclusion is straightforward: the gap between developing and wealthy nations has grown even greater between 2008 and 2023, despite the goals set forth by the Bretton Woods institutions and the purported advantages of capitalism.

Another cause is the structural adjustment policies that have led to the privatization of healthcare systems in the countries of the Global South and increased their dependence on cereal grains, agricultural inputs and other imported products. As we explained earlier, these policies, shoved down the throats of these countries for more than 40 years now, have made them unable to face external shocks like the CoViD 19 pandemic and the global rise in grain prices.

In the 2023 World Economic Outlook, the IMF says that it will take 130 years for developing countries to reduce the gulf between their per capita income and that of the developed countries

Two centuries ago, at the start of the capitalist industrial revolution, the difference in per capita income between what are now called developing and developed countries was very small. Today’s victorious capitalism on a global scale has increased the gap between nations as never before. Not to mention the gap within each nation, whether in the South or the North, between the richest 1% and the bottom 50%.

It is high time to dissolve the World Bank and the IMF and build another international architecture that respects human rights and nature. It’s high time we got rid of the capitalist system and embarked on an ecosocialist, internationalist, feminist revolution.

In the 2008 World Economic Outlook, the IMF has said that it would take 80 years to educe that gap. The conclusion is simple: between 2008 and 2023, the gulf between developing countries and developed countries has increased even more

To grasp the full scope of the worldwide crisis of the capitalist system, other facets of that crisis need to be taken into account:

• The environmental crisis and climate change have reached a point of no return and their effects on populations are taking on enormous proportions as greenhouse-gas emissions continue to pile up.

• The food crisis, which as noted was particularly severe in 2008-2009, is again gaining intensity. [38] At the planetary level, between 2014 and 2021, the number of people suffering from serious food insecurity has increased by more than 350 million, form 565 million to 924 million. The increase was particularly severe forte between 2019 and 2021, affecting slightly over 200 million people. In 2021, an estimated 2.3 billion persons (29.3 percent of the global population) were exposed to moderate or severe food insecurity. [39]

• The migratory crisis caused by the inhuman policies of the Northern powers and exacerbated by the effects of the environmental, climatic, and food crises, war and violations of human rights.

• The crisis of governance and the rise of the far Right both in the North and in the Global South. Governments are losing legitimacy and compensating by increasing repression. They are more and more authoritarian and are circumventing elected legislative bodies, in the South and in the North. An obvious example in France and the use of “legislation” by decree as permitted by Article 49.3 of the 1958 constitution, which has been used over and over again by president Emmanuel Macron to force imposition of policies that have been rejected by a majority of the population, which has expressed its support of citizen movements who oppose such authoritarian practices.

We are seeing governments take actions that are clearly neo-Fascist, racist and fundamentalist – examples being Narendra Modi in India, Netanyahu in Israel, Trump with the support of religious conservatives, Javier Milei engineering Argentina, Boluarte in Peru, Bukele in El Salvador, Marcos in the Philippines, Kais Saied in Tunisia, Putin in Russia or the regime in Iran supported by Islamist fundamentalists.

The lack of revolutionary solutions and advances creates a vacuum that opens up opportunities for armed forces to take power (as in the Sahel). The military do not have real alternatives to offer to the people, yet they manage to garner popular support given the loss of legitimacy of the regimes in place and a demand for independence from the French State. in Senegal, in 2021, supermarkets of the Auchan chain – symbols of French capitalism – were attacked whereas small local businesses were not.

• Current wars, with the State of Israel’s policy of genocide against the Palestinian people, the war in Ukraine, the wars in Sudan, in the Eastern Democratic Republic of Congo, in Yemen, etc.

• The banking crisis of 2023, which shows that the worldwide financial system is still just as fragile as it was at the time of the crisis of 2008.

• The return of austerity in the North. At the start of the CoViD crisis, Mario Draghi, who had ended his term of office at the head of the ECB in late 2019, and his successor Christine Lagarde, declared that public debt needed to be increased in order to deal with the pandemic. Needless to say he never mentioned the possibility of making the major private corporations who were reaping huge profits from the crisis – Big Pharma, the GAFAM companies, the major retail chains – bear so much as a part of the cost of the struggle against the pandemic and its multiple effects. To avoid raising questions in the public’s mind about how the necessary struggle against the pandemic was to be financed, European leaders temporarily relaxed the EU’s budgetary rules. Now that public debt has shot up and the cost of refinancing it has skyrocketed due to the increase in interest rates, the same leaders have announced increasingly harsh austerity measures on the pretext that public debt has reached unsustainable levels. These austerity policies must continue to be aggressively denounced and the fight for cancellation of illegitimate public debts must continue.

• The aggravation of indebtedness among the working classes caused by the stagnation of income, which requires families to borrow just to meet expenditures for health, education, housing, heating, transportation, and other needs.

 Conclusion

Since the 1960s, debt has been used as a tool for massive neo-colonial dispossession. It has enabled capitalists in the Global South as well as in the North, the governments of the North, and major banks and international financial institutions to stage a gigantic transfer of wealth – both financial and natural wealth – from labour to capital and from the South to the North. Debt enables creditors in the North to draw in interest on a permanent basis by forcing the deployment of policies that increasingly strip power from the governments and peoples of countries of the South and of the North (such as Greece) and constantly increase inequalities. The same process continues outside the boundaries of States: the IMF and the World Bank have used debt to drag the countries of the South into the vast worldwide neoliberal market. They have driven them to increase their specialization in monocultures for export without adding value and have made them vulnerable to external shocks. Audits of debt with citizen participation to identify and cancel those that are illegitimate, odious and illegal are more vital than ever. The CADTM urges the States of the South to take unilateral sovereign measures to suspend repayment and repudiate debts.

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Translated by Snake Arbusto and CADTM.