Committee for the Abolition of Illegitimate Debt

Historically, capitalism was developed by the looting of natural and human resources (territorial conquests, triangular trade, Atlantic slave trade, slavery) starting in 1492 with the discovery of the America.

The end of slavery in the mid 19^th century coincides with the period of the conquest of almost every continent by the Europeans. This growth of looting, and the suffering of the colonized countries’ workers, was legitimized by and for the development of new factories and trading Market activities
trading Buying and selling of financial instruments such as shares, futures, derivatives, options, and warrants conducted in the hope of making a short-term profit. companies born with the industrial revolution. At the Berlin conference of 1885, “the scramble for Africa” organized the partition of the African continent between European countries.

World War II marked the end of colonization by European occupation. US dominance created a consumer society in the Triad countries ([that is] Western Europe, North America and Japan). This, in its turn, created a still greater need for natural resources.

How could the theft of the newly independent countries wealths be continued by the rich countries ? To ensure the continuity and increased extractivism, defined here as the plundering of natural resources (plant, mineral, fossil) and human resources, a new type of looting was implemented. This used financial resources : illegitimate, odious or illegal debt is also a lever for the plundering of a country’s natural resources and a form of financial looting.

Like for a company, a country, taking a loan with 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. , is a bet on the future. If there is no development of GDP GDP
Gross Domestic Product Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another. or of the turnover, repayment becomes impossible and the debt will explode. Debt is essential to the development of capitalism, it forces to produce more and more for foreign markets. Debt is an accelerator of extractivism at the base of capitalist accumulation and a means to appropriate the economic growth of other countries : those in the periphery.

In the global South, illegitimate debt is a way to corrupt the local elite that is in power. The secret services of the North have assassinated the true democrats such as Lumumba, Sankara and Allende, or dismissed others such as Mossadegh and Soekarno, and replaced them with corruptible rulers such as Mobutu, Compaore, Pinochet, Reza Shah, Suharto, for example. They enforced repayment, by the populations, of loans that they had not benefited from but of which they were the victims. It is therefore, a plundering of human resources.

The debt also extracts from the borrowing poor country, or “developing country”, by a double exportation : first, the raw materials that are exported in exchange for foreign currency, and secondly, a large part of the foreign currency obtained, is used to pay the interest on the debt. During the big debt crisis of the eighties the IMF IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

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

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

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

http://imf.org provided more loans to the global South. But in fact developing countries have helped the rich to be richer by transferring many more dollars to the financial markets of the North than they have received. That’s the magic of the illegitimate debt system.

After losing the jobs and capital gains, that would have been created by the transformation of natural resources to central or industrialized countries, developing countries are forced to increase exports of raw materials. To benefit from new funding from the World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

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

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

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

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

or the IMF by creating education, health and infrastructure systems, etc., they are obliged to apply 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/ programs.

Socialist countries such as Venezuela, Bolivia and Ecuador are practising neo-extractitivism (they have again become owners of their natural resources by taking over the multinational companies in control of their mines and oil wells). They are engaged in an export-dependent economy relying on the growth of commodity prices and the growth in the GDP of industrialized countries. In fact, they support the globalization system. The abandonment by Ecuador’s president, Correa, of the Yasuni project, which would have left oil untouched, under the soil of the Amazon rainforest, in exchange for international financial aid shows this clearly. The environment and the climate are not Correa’s priorities, GDP growth is his priority, like most of the countries today.

In the North, the ultra-liberal system voluntarily wants to reduce state intervention by creating tax cuts to business and wealthier individuals and especially by tolerating tax havens and all tax optimization possibilities, as exposed by the Luxembourg leaks investigation. Budgets have been deliberately put into deficit for the last 30 years. Treasuries are empty, governments have to issue bonds and increase the public debt each year 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. public finances. While the subprime loans crisis began in 2007 through the fault of speculators, it is the international banks that have been rescued by governments and the peoples who have suffered austerity policies.

Spending cuts, reduced public services, privatization programs, increased taxes for the middle class, and especially increased economic growth to solve the unemployment problem, became the TINA cry of all European governments. The payment of France’s debt interests swallows 15 % of the French budget, but annuities, rents and interest paid to capital holders are never put to contribution. The only proposition is growth, and wage cuts, in the name of competitiveness.

Auditing

It is very important for the people to make a citizens audit of State’s financial resources: who is paying taxes ? do the rich pay tax according to their income ? is there a tax on existing capital ? VAT, this unfair - indirect tax - that hits the poor the hardest, what is its rate ? what is the State really doing against the tax havens ? what is the percentage of the GDP that is going to the repayment of interest of public debt? France pays out €45 billion a year. Is its very high stock of debt, nearly 100% of GDP, legitimate, or is it solely the result of bailing-out the banks and rescuing the economy ? In 2014, an independent report by NGOs and alternative economists concluded that 59% of French debt is illegitimate. When the great majority of the people receive no 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. from a loan, they need not pay the reimbursements. They are victims of the illegitimate debt.

On the other hand, the auditing of state spending is also crucial: does it serve social purposes, health, education, etc. or are they used for unnecessary investment ? “White elephants” such as big football stadiums for only one tournament as in Brazil or empty airports as in Spain, are creating public debt. A lot of investments are not done in the interest of the public, but for the benefits of buildings & public works companies and the convenience of the 1%.

Why does the “Treaty of Lisbon” prohibit one European country from lending to another? Is it normal that the Greek State should be obliged to borrow from a private bank at an interest rate of 4 % to 10 %, while the same bank borrows from the ECB 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 at 0.05 % ? How can we understand that in 2009 the Greek debt stock Debt stock The total amount of debt was at 115% of the GDP and after five years of bail-out by the Troïka ([that is] the ECB, the European commission and the IMF) it is now at 175% ? In the same time the Greek people have lost 30 % off their incomes, youth unemployment is more than 60%. Half of Greek public debt was owed to French and German banks when the crisis started. After the bail out, the ECB now owns a part of the debt, the other part is held by the richest European states that are obliged by the European Stability Mechanism ESM
European Stability Mechanism The European Stability Mechanism is a European entity for managing the financial crisis in the Eurozone. In 2012, it replaced the European Financial Stability Facility and the European Financial Stabilisation Mechanism, which had been implemented in response to the public-debt crisis in the Eurozone. It concerns only EU member States that are part of the Eurozone. If there is a threat to the stability of the Eurozone, this European financial institution is supposed to grant financial ‘assistance’ (loans) to a country or countries in difficulty. There are strict conditions to this assistance.

http://www.esm.europa.eu/ (ESM), that is all the European citizens, but private foreign banks are no longer involved.

We must not forget that after World War II public debt in Germany and in France was about 200 % of GDP. The Allied countries decided that the German reimbursements need not be more than 5 % of their exports. In the end they never paid at all. That was permitted so that Germany could grow strong again and resist USSR power. In France after ten years of high 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. the French debt had fallen to around 30 %.

Mainstream medias and politicians say we need economic growth and competitiveness to fight unemployment. Is that true and what does that mean ? We know that capitalist’s profits are quite impossible without growth. It doesn’t matter if growth means more plundering of natural resources, more trade and international transport which in turn produces more consumer goods, with planned obsolescence, causing environmental destruction and global warming. If more competitiveness means more poverty for a lot of people in developing or peripheral countries, even in industrialised countries, capital holders are not concerned.

In the US and Europe, with the ultra liberal policies implemented by the Reagan and Thatcher governments during the eighties and after, a significant portion of the gain generated was retained by capital holders and lost by workers who only maintained their living standards by borrowing. In 2007, when the crisis started with a property market crash, Americans were indebted, on average, up to 140% of their annual income.

In the global North or South, economy and profit growth are linked today with the debt system. To get out of this dynamic, to go forward to a post-extractivist and post-consumerist society, cancelling of the illegitimate debt is absolutely necessary but obviously not enough.

Degrowth, debt and agriculture

For degrowth, one of the most important issues is agriculture and food. Agricultural productivism is a crime against humanity and all living things because it is a major cause of global warming, loss of animal and plant biodiversity, degradation of soil fertility, hunger, and loss of almost all farm saved seeds. This can lead to the greatest globalized famines as we have ever known. It could be responsible for the loss of a population’s food autonomy, loss of small farmer and small holder agriculture, loss of know-how in self-preparation of raw foods, and cause degradations of public health and social security deficits.

Pesticide producers are paid polluters, although indirectly, by the CAP subsidies which cause budget deficits and public debt. Social security services enter into deficit through being forced to borrow on the capital markets. 80% of diseases in industrialized countries are long-term illnesses predominantly caused by an environment charges with pesticides and others pollutants. Agricultural overproduction has created an abundance of poor quality food and malnutrition for everybody. A third of the world’s population is overweight or obese, while another third do not have enough to eat to have an active life.

This kind of farming can only work by extracting potash, phosphate and oil, by polluting and then rejecting 70 % of the fresh water, and also by extracting organic matters in the soils, even causing desertification. It has created unemployment in France since 1945. Nearly 10 million agricultural jobs have disappeared. According to the association GRAIN, land grabbing by international speculative finance represents nearly 200 million hectares. Land has been grabbed in developing countries and in Eastern Europe, then transformed into productivist agriculture for biofuels and fodder production for industrialized countries. Along with illegitimate debt cancellation, a consequent decline in meat consumption and the abandoning of industrial and chemical agriculture are the most important degrowths to achieve. Their positive impact on the climate, health and hunger will be considerable.