Debt Abolition Activists Gear Up for Countersummit as World Bank and IMF Meet

Activists from the global movement for debt abolition are converging October 12-15 in Marrakesh, Morocco.

7 October 2023 by Eric Toussaint , Ashley Smith

Activists in the global movement for debt abolition are gearing up to mobilize in Marrakesh, Morocco, where the World Bank and International Monetary Fund (IMF) are holding their annual meeting October 9-15, despite the devastating earthquake that laid waste last month to whole sections of the country.

Planned in protest of the elite meeting, the activist countersummit will bring together delegations from social movements from all over the world, creating a counterforce to the roughly 10,000 bankers, corporate CEOs and government bureaucrats who will descend on the country to stay in five-star hotels and discuss how to manage the debt system they impose on countries of the Global South.

Truthout’s Ashley Smith talked with one of the key organizers of the countersummit, Éric Toussaint, about the nature of the debt system and struggle to abolish it. Toussaint is the spokesperson of the Committee for the Abolition of Illegitimate Debt, and part of the Scientific Council of ATTAC France. He is the author of many books, including The Debt System: A History of Sovereign Debts and Their Repudiation and the newly released The World Bank: A Critical History.

Ashley Smith: The Global South is caught in yet another growing sovereign debt Sovereign debt Government debts or debts guaranteed by the government. crisis. What caused so many countries to get trapped in debt? What has triggered the current debt crisis?

Éric Toussaint: Since the Great Recession, there has been an enormous increase in indebtedness among developing countries, particularly the poorest ones. The root cause of this growth in debt is the policies adopted by imperialist states to revive their economies.

They implemented quantitative easing, injecting billions of dollars, euros and pounds into their financial markets to revive big banks and 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.
that were on the verge of bankruptcy. Flush with cash, these financial institutions sought out profitable sites for investments.

They did not find them in Global North, where rates of return were near zero. So, instead, they purchased sovereign bonds issued by developing countries, including desperately poor ones like Rwanda and Ethiopia. They reaped between 4 and 6 percent returns on those bonds.

The rulers of these countries then convinced financial markets to lend them more money. In turn, they boasted to their people that the sale of bonds and the new loans would garner them a better future.

Access to these private investors and lenders was a new development. Previously, the poorest countries could only secure loans from the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

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

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

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
, World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

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

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

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

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

, and other multilateral banks as well as bilateral creditors like France, Britain, China and the U.S. But the price of this access was the massive growth of indebtedness.

Several shocks to global capitalism precipitated a new debt crisis. First, the pandemic temporarily shut down world economy. Poor countries were suddenly subject to huge expenses in public health, while their export markets closed down and tourist travel stopped, throwing the states into budgetary crises and their economies into freefall.

On top of that, the Ukraine war drove up the price of food, which many if not most developing countries import, imposing new costs on poor people. And then, the 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 :
Bank and other central banks dramatically raised their 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.
to combat 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. , depress demand and lower wages. The new rates dramatically increased the price of new loans to keep their states and economies afloat.

These shocks have triggered the sovereign debt crisis that is sweeping whole swathes of the Global South. In just one example, Ghana, which had been celebrated as a neoliberal success story, was forced to suspend their payments to creditors.

Who are the main holders of the Global South’s debt today?

Private creditors like investment funds, banks and the local ruling classes of the Global South hold more than 50 percent of the total external debt. About 25 percent is held by multilateral institutions like the IMF, the World Bank, the Asian Development Bank, the African Development Bank and the Inter-American Development Bank. The rest is in the hands of bilateral creditors like the U.S., European countries and China.

The poorest are mainly in hock to the IMF and World Bank. Some emerging countries are also under their thrall; Argentina owes them about $44 billion and Ukraine about $20 billion.

The IMF and World Bank will be meeting in Marrakesh, Morocco, this month. What agenda are they attempting to advance at their summit? What impact will that have on the indebted countries?

Their agenda is to affirm a few key things. First, they will remind the world that no other institution (and especially not the 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. New Development Bank) can replace them. We must remember that the U.S. controls the IMF and World Bank and uses them as its imperialist tools, despite the participation in the two by other countries, including China.

So, the U.S. wants to assure that the IMF remains the creditor of last resort and the World Bank the principal lender for national development in the Global South. Washington thus wants to fend off China’s bid to rival its economic and political hegemony.

Second, the U.S. wants to reinforce its model of its neoliberal model — deregulation, privatization, flexibilization of labor markets and opening countries up to multinational capital. Of course, they cannot say this publicly as such policies are so discredited.

Instead, they will say that their aim is to alleviate debt, lessen poverty and strengthen the economies of the developing countries to confront climate change and ecological crisis. But this is hardly credible especially from current leaders of the two institutions.

Just look at Ajay Banga, the new head of the World Bank. Before his appointment, he was the director of Mastercard and had no experience in development but was adept at fleecing people by charging them exorbitant interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. rates for credit cards.

For example, he convinced the African National Congress government in South Africa to end its policy of disbursing social assistance in cash to poor people and instead do it through a credit card. Of course, this came with the offer of signing a contract to pay any debts they incurred at 5 percent interest. This was such a corrupt racket that it was shut down in just five years.

The managing director of the IMF, Kristalina Georgieva, has an equally checkered history. While employed as a senior official at the World Bank, an independent inquiry found that she had doctored data to make China’s business practices look better to justify granting it increased voting rights at the World Bank at a time when Washington and Beijing were collaborating under the Obama administration.

At the European Commission, she supposedly helped Haiti recover from its earthquake in 2010. Such aid from the Europe, the U.S. and the international financial institution has left Haiti worse off today than ever before.

So, no one should take at face value these two institutions’ professed concern about ethics, debt and poverty. It is just rhetoric. At best, they want private lenders to alleviate some debt and take a haircut in the value of their loans. They say the same to bilateral creditors like China.

But the IMF and World Bank themselves never reduce the volume of their loans to developing countries. Of course, they periodically announce schemes for temporary suspension of payments and debt alleviation for the poorest countries. But never debt cancellation.

They merely offer new loans, expanding overall indebtedness. For example, they just announced $1.3 billion more in loans to Morocco supposedly to help it recover from the disastrous impact of the earthquake it recently suffered.

But these loans will only add to its existing external debt of $63 billion, which is over 70 percent of the country’s 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.
. So, the IMF and World Bank are really just imperialist loan sharks masquerading as angels of development and charity.

You have helped organize a countersummit to challenge these two institutions. Who is part of the countersummit, and what will the assembled forces be demanding and what campaigns are you launching?

Over 20 groups from Iraq are sending a delegation. Palestinian organizations will be participating, as well groups from Niger, Mali, Burkina Faso and Gabon. And we will have delegations from Latin America, Asia and Europe.

We have large delegations coming from all over the world. They are coming from groups active in movements for debt abolition, climate justice, women’s rights, social justice and economic equality.

We have very important delegations from countries in Africa and the Middle East. For example, over 20 groups from Iraq are sending a delegation. Palestinian organizations will be participating, as well groups from Niger, Mali, Burkina Faso and Gabon. And we will have delegations from Latin America, Asia and Europe.

The main demand that we will be making is for the immediate and total cancellation of sovereign debt. On top of that we will be addressing a host of other related issues that debt exacerbates from climate change to systemic poverty.

One thing that is striking through all the preparations for the countersummit is the radicalism of a new generation of activists. Almost everyone involved in climate justice campaigns know perfectly that this system cannot be reformed. This is especially true among young activists like Greta Thunberg.

Such radicalism today is typical, not exceptional. People don’t have the same illusions as they had in the ’80s, ’90s and early 2000s. Back then global justice organizations like ATTAC believed they could win a Tobin tax Tobin Tax A tax on exchange transactions (all transactions involving conversion of currency), originally proposed in 1972 by the US economist, James Tobin, as a means of stabilizing the international financial system. The idea was taken up by the association[ATTAC and other movements for an alternative globalization, including the CADTM. Their aim is to reduce financial speculation (which was of the order of 1,500 billion dollars a day in 2002) and redistribute the money raised by this tax to those who need it most. International speculators who spend their time changing dollars for yens, then for euros, then dollars again, etc., as they calculate which currency will appreciate and which depreciate, will have to pay a small tax, somewhere between 0.1% and 1%, on each transaction. According to ATTAC, this could raise 100 billion dollars on a global scale. Considered unrealistic by the ruling classes to justify their refusal to adopt it, the meticulous analyses of globalized finance carried out by ATTAC and others has, on the contrary, demonstrated how simple and appropriate such a tax would be.

on speculative transactions as a reform to combat indebtedness and speculation.

But 20 years later, we have no Tobin tax, speculation has run rampant and the debt crisis is even worse. So, activists have fewer illusions about such limited reforms.

However, the overall movement is weaker. In the early 2000s, it was easy to mobilize tens of thousands and in some cases hundreds of thousands of people for countersummits in cities like Washington, Prague, Bangkok and Genoa.

Today, we do not have this capacity. There are many reasons for this including disillusionment, repression and the difficulty of traveling. There is also a temptation to substitute small group actions for mass ones.

we have no Tobin tax, speculation has run rampant and the debt crisis is even worse. So, activists have fewer illusions about such limited reforms.

Of course, we defend and support civil disobedience to disrupt summits. But such actions, however well intentioned, will not stop the imperialist powers, their financial institutions and private lenders from enforcing their debt system.

We need masses of people in motion internationally to win debt abolition. We see our countersummit in Marrakesh as a step in building a new internationalism and renewed capacity for mass mobilization.

One of the countries you are calling attention to at the countersummit is Ukraine. How does it fit into the overall pattern of debt and 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).

? Why should countries in the Global South see its struggle for self-determination and debt cancellation as part of their own?

Everyone should support Ukraine’s struggle against Russian imperialist aggression. It, like all oppressed countries, should have the right to self-determination. But Ukraine’s struggle is not just against Russia but also the Western powers, which nominally support it.

The U.S. and its allies imposed a shock doctrine on the country in the 1990s and maintain it in debt peonage today. So, Ukraine’s struggle is against two enemies — Russian imperialism and Western imperialism.

The West wants to strengthen NATO NATO
North Atlantic Treaty Organization
NATO ensures US military protection for the Europeans in case of aggression, but above all it gives the USA supremacy over the Western Bloc. Western European countries agreed to place their armed forces within a defence system under US command, and thus recognize the preponderance of the USA. NATO was founded in 1949 in Washington, but became less prominent after the end of the Cold War. In 2002, it had 19 members: Belgium, Canada, Denmark, France, Iceland, Italy, Luxembourg, the Netherlands, Norway, Portugal, the UK, the USA, to which were added Greece and Turkey in 1952, the Federal Republic of Germany in 1955 (replaced by Unified Germany in 1990), Spain in 1982, Hungary, Poland and the Czech Republic in 1999.
and impose its neoliberal model on Ukraine, where it has not been fully adopted. So, the U.S. and its allies use the carrot of integration into the EU to accept the stick of neoliberalism.

Of course, the Zelenskyy government and the Ukrainian oligarchs are complicit in all this. They, just like ruling classes in the Global South, have profits to make from neoliberalism and integration with global capitalism.

Thus, Ukraine’s predicament is not all that different from countries in the Global South. So, there is a basis for solidarity with people in Africa, Middle East, Asia and Latin America. We should unite in solidarity raising demands of self-determination and debt cancellation everywhere from Ukraine to Ghana.

But it’s not an easy argument, because many see the U.S. and European powers as the principal enemies, which is understandable given their long and brutal histories of imperialism. And Vladimir Putin takes advantage of that to pretend to represent the interests of the Global South.

That is a lie. In workshops at our countersummit, we will expose the Russian regime as a brutal imperialist power.

Why is it so important to win debt cancellation for the Global South?

Abolition of illegitimate debt is an essential but insufficient condition to make structural reform in impoverished countries. Such reform is impossible if countries are not emancipated from their imperialist creditors.

Those powers use debt to impose their will on underdeveloped countries. Debt alleviation is no solution, as it maintains indebtedness, and with it, national oppression. That’s why we demand unconditional abolition.

At the same time, abolition of debt alone is not enough if domestic ruling classes maintain private ownership of the economy and natural resources. So, abolition of debt must be a key component of building a radical, anti-capitalist movement for system change in each country and globally.

Source : Truthout

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Greece 2015: there was an alternative. London: Resistance Books / IIRE / CADTM, 2020 , Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012, etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

Other articles in English by Eric Toussaint (632)

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Ashley Smith

Ashley Smith is a socialist writer and activist in Burlington, Vermont. He has written in numerous publications including Truthout, International Socialist Review, Socialist Worker, ZNet, Jacobin, New Politics, Harpers, and many other online and print publications. He is currently working on a book for Haymarket entitled Socialism and Anti-Imperialism.

Other articles in English by Ashley Smith (5)




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