Committee for the Abolition of Illegitimate Debt

Éric Toussaint interviewed by Jorge Muracciole.
The magazine Tiempo Argentino interviewed, from Buenos Aires, Éric Toussaint, spokesperson for the international network of the Committee for the Abolition of Illegitimate Debt.

Jorge Muracciole : The CADTM speaks of a new international debt crisis. What are the root causes of this newly emerging debt crisis?

Éric Toussaint : There has been a succession of external shocks, originating in the countries of the North, impacting the South and triggering an aggravation of debt-related issues. The first shock resulted from the effects of the pandemic in the geographical North, then on the populations of the South. The effects were particularly drastic in countries like Peru, Ecuador and Brazil. The pandemic had serious economic repercussions, exacerbated by the cost to States of the fight against the virus. In many cases this brought on an increase in external and internal indebtedness. In 2020 and 2021, many governments preferred to finance the fight against the effects of the pandemic with debt rather than tax the huge economic conglomerates such as “Big Pharma” or GAFAM (Google, Amazon, Facebook, Apple, Microsoft), all of which made tens of billions of dollars in profits from the pandemic.

Jorge Muracciole : And the other shocks?

Éric Toussaint : The second one was Russia’s invasion of Ukraine, which generated great speculation on behalf of the oligopoly that has the most control over world trade prices for cereals. This forced up the price of wheat and other cereals, as Ukraine and Russia are major exporters of these products. The speculation was set in motion by the oligopolistic market as 80% of the international cereal trade is controlled by four multinational corporations (three from the USA and one European). The price of fertilizers and fuel also increased. This new scenario severely penalized the countries of the South who are net importers of cereals, particularly on the African continent, from Egypt to Senegal to Tunisia.

These external shocks meant that public indebtedness soared, as governments refused to fund the increased spending they were faced with through taxation of the gas and petroleum companies, the big retailing companies or the big agri-business corporations. The wealthiest 1% were not asked to contribute and continued to become richer and richer, in unheard-of proportions.

The third shock element was the unilateral decision by the US 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/ , 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, starting in 2022, to drastically raise 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. , going from 0.25 % to 5.25 % in the United States and the United Kingdom, and from 0 % to 4.25 % in the Eurozone. The financial consequences of these moves have been extremely tough for the countries of the South. The financial flows that formerly were directed towards the South, in view of these new rates in the main countries of the North, have been directed to buying up government bonds in European countries or the United States, which offer greater yields and greater security. Lenders in the North are demanding ever higher 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 from the South. The ruling classes of the South are also making a 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. , buying internal and external public debt paper.

Jorge Muracciole : The present historic context is quite different from that of the 1980s, when there was a significant external debt crisis opposed by leaders such as Fidel Castro or Thomas Sankara, then president of Burkina Faso in Africa.

Éric Toussaint : The similarities come from the unilateral expansion of the US Federal Reserve and the central banks of Europe. A major difference is that in the present situation, there are no leaders like Fidel Castro of Cuba or Thomas Sankara, the young leader of Burkina Faso. In today’s indebtedness situation, the progressive governments are not as radical, as creative or as brave as the governments that led the opposition to increased debt repayments in the 1980s. Even the present Cuban government does not defy its creditors, and keeps a low profile when prosecuted by 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. in British courts of law. As for Burkina Faso, there is a gaping chasm between actual practice and the radical discourse of the president, Captain Ibrahim Traoré, regarding the country’s creditors and their predatory economic model. Indeed, Burkina recently signed, in early July 2023, an agreement with the IMF for 300 million dollars. In the case of Mali, the government is also keeping up its payments. In Niger, the military junta has just appointed Ali Mahamane Lamine Zeine as prime minister, who formerly worked for the World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

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

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

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

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

and the African Development Bank in Chad. This dyed-in-the-wool neoliberal was Niger’s Minister of Finance from 2003 to 2010 under President Mamadou Tandja [1]. We could also cite the attitude of the Sri Lankan government when, just after a popular uprising against the presidential clan in 2022, the new government made a very harsh agreement with the IMF. Not to mention the Argentine government which, by making a damaging agreement with 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 , encouraged the sudden rise of the far right in the preliminaries of August 2023.

There is a shortage of leaders ready to oppose creditors and take action to change the 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. of power in favour of the people. We have to rely on grass-roots mobilization and the ability of the popular classes to recognize the true nature of what is going on, and to campaign for profound structural change. It is with this in mind that the Committee for the Abolition of Illegitimate Debt has called for a peoples’ counter-summit to be held in Marrakesh in October, on the occasion of the Annual Meetings of the World Bank and the IMF, also to be held in Morocco.

Jorge Muracciole : The indigenous peoples, especially those in the Argentine province of Jujuy, are fighting for their rights to the land and against appropriation by the extractive companies trying to usurp it in collusion with the provincial government. These practices are part of the many actions of the big mining companies managing one of the world’s largest deposits of lithium.

Éric Toussaint : That exemplary struggle in the north of Argentina is a clear demonstration of people’s resistance to extractivism. Such struggles are being waged not only in the Global South, but also in other latitudes, in the open-cast mines of Germany or by the outstanding movement of the Swedish activist, Greta Thunberg. Seeing the development of ever-harsher repressive measures inflames young people in the underprivileged areas of the Paris suburbs and other French towns.

Jorge Muracciole : We note that in countries that pride themselves on being examples of democracy, there is a tendency towards authoritarianism. This was apparent in France during the protests against the pension counter-reform. Protesters were subjected to harsh repression and there was a blatant disregard for legal process. In several countries the far right is flying high, profiting from people’s disillusionment and dissatisfaction. It’s happening in Argentina with the Milei phenomenon.

Éric Toussaint : For decades, in the countries of the South, the issue of debt has served as a pretext 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/ policies diametrically opposed to the needs of populations. The year 2023 has beaten all records for the greatest number of fiscal adjustments. The IMF is on the offensive in all countries. Over the last three years, it has agreed over 100 loans to numerous countries, taking advantage of the pandemic and, more recently, the economic effects of the war in Ukraine, with privatization programmes and programmes reducing workers’ rights. The IMF is far stronger than it was twenty years ago. In 2005, countries like Brazil and Argentina had repaid their debts to the IMF in advance in order to free themselves of the conditionalities. Whereas with the new loan to Argentina and a hundred other countries like Egypt, Ghana, and others in Asia (Pakistan, Sri Lanka, Bangladesh), violent policies with cold-blooded adjustments are implemented.

Jorge Muracciole : In the editorial of the CADTM’s magazine “Les Autres Voix de la Planète” (The Other Voices of the Planet), it is emphasized that in the North as in the South, debt is at a crossroads, and that the only way of dealing with it is to intensify our struggles.

Éric Toussaint : We must have a diagnosis that faithfully reflects reality. From 1985 until 2015, there was a boom in anti-debt movements; from when Argentina decided not to pay its debt at the end of 2001, and Ecuador chose non-payment of debt and an audit at the beginning of the Rafael Correa administration in 2008-2009, until Syriza triumphed in 2015. Since Syriza’s capitulation, anti-debt movements have been in a state of reflux. The challenge now is to tackle the latest debt crisis. Bring together more and more social forces and focus their efforts on intercontinental and international levels to carry out audits, suspensions of payment and debt repudiation.

We are witnessing a global crisis of Capitalism

Jorge Muracciole : The struggle against Capitalism has become more urgent due to its predatory nature and its destruction of the environment.

Éric Toussaint : It would be illusory to imagine that Capitalism in its present configuration could be reformed. For a short period after World War II, within the context of Capitalism itself, some social concessions were made, and there were even some developmental measures. Today we are faced with a Capitalism “running on empty”, enmired in crises, with the ecological, climatic and environmental crises, as well as a food crisis, with more than 250 million more people suffering from hunger in 2023 than in 2014. We are witnessing a global crisis of Capitalism that must be faced with a global response – an anti-capitalist, feminist, ecologist and antiracist response.

English translation (from the French) by Vicki Briault Manus (CADTM)