Committee for the Abolition of Illegitimate Debt

More than two years have passed since the holes in the neoliberal system’s ability to generate the world population’s wellbeing became apparent. The crisis generated by this model is so huge that it requires the cooperation of all the countries of the globe. Within this framework, the G7 tried to legitimize a new space with the G-20, in which some emerging economies were included as a political way-out to contain the damage created by the crisis. It was self-proclaimed as a forum that would resolve the world economic crash, capable of generating agreements with binding powers on fiscal collaboration and financial regulation. However, this has not been achieved and the reality is that G-20 is not a group that seeks the common 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. . The currency war and the differences between implementing a pro-cyclic or counter-cyclic policy is wearing down this space, demonstrating that the former G7 want to keep control of it for the benefit of their national lobbyists. The central point of the
crisis is the issuance of unregulated financial derivates by the private bank has not been duly dealt with. Worse still, the same workers and pensioners affected by the neoliberal reforms are paying for the state of indebtedness in many developed countries that resulted from efforts to save this bank. The
global economic model consisting in reducing the salary weight and the tax on 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. (gross domestic product) with the consequent concentration of the income in 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. is intact and Europe that was resisting to the model entered in 2010. In spite of the crisis, consumption based on credit continues increasing.

In view of this situation we are concerned that:

1. The crisis has not ended: Despite the G-20 rhetoric stating that they have avoided the world debacle, the rates of public debt in European countries belonging to the OECD OECD
Organisation for Economic Co-operation and Development OECD: the Organisation for Economic Co-operation and Development, created in 1960. It includes the major industrialized countries and has 34 members as of January 2016.

http://www.oecd.org/about/membersandpartners/ estimated in 2010 averaged 81%, showing a significant fiscal crisis in the Old World. Germany and Great Britain’s debts surpassed 82% of the GDP and France’s debt reached 92%. Further, there is a high risk of
financial bubbles generated by speculation in commodities Commodities The goods exchanged on the commodities market, traditionally raw materials such as metals and fuels, and cereals. . This has generated a currency war in which the US wants to obtain liquidity Liquidity The facility with which a financial instrument can be bought or sold without a significant change in price. and competitiveness printing out dollars and demanding that other countries revaluate their currencies, without regard to the impact on the populations of
these countries. All of this hurts employment, and with it, the wellbeing of the population.

2. Despite the discredit that the international financial institutions fell into, the outdated neoliberal model now has on the IFIs (International Financial Institutions) their most tenacious operators and defenders.

 The voting system in the IFIs does not reflect the change in the world power nor on the new role played by Brazil, Russia India and China (BRIC). Let alone reflect the diminution of Europe in the international economy. What there is in the G-20 is a double representation of Europe through the European Commission in addition to each European country member of the
G-7. By 2018 the BRIC +3 (Indonesia, South Korea and Turkey) will weigh more than the G-7, opening the discussion on the general power structure.

 The IFIs has attempted to escape from its own crisis of legitimacy, repositioning itself and adopting another language. 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 through the Flexible Credit Line has managed to channel the money destined to resolve the crisis but has not removed the conditions. Essentially, it has placed them as entry requirements. 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.

administers the “green funds” to
overcome problems of climate change, but these only consists in a small percentage of its portfolio, it continues financing industries based on non-renewable energy.

 The policies recommended for industrialized countries are those already known by the Developing Countries: Trade and capital openness, de-regulation of labour and cost-reduction,despite the social impacts generated in the past.
There is the intention to consolidate a ‘global network of financial security and development promotion” to counteract the sudden fluctuations in capital and to respond faster in the face of the next crisis. In other words, it seeks palliatives but not a solution to avoid the system’s chronic crises.

 The restructuring of the IFIs cannot be centred in minimal and insufficient increases in the participation quota of some Developing Countries, particularly when the direction of them is maintained between the world powers. The IFIs should be under the direction of the United Nations to serve the universal common interest, its functions reduced and adapted to coordinate
with the institutions resulting from regional initiatives that are growing in strength on the continents.

3. There is no political will to regulate the speculative markets: All the decisions are made slowly and of the few important proposals presented within the United Nations Conference on the World Financial and Economic Crisis and Its Impact on Development, not one of them was put into practice. Basilea III could not go from a speculative bank to a bank based in reserves.

4. Worse still, there is no interest in getting out of the crisis. The G-20 debate reaffirms the neoliberalism and looks for ways to preserve it. Essentially, it is looking to maintain the status quo that secures the profit of some transnational.

The issues to be discussed at the Korean Summit –the capital structure of the banks, the strengthening in the regulation of systematically important financial institutions, the distribution of public funds between the financial sector, and others- possess a limited impact on improving employment, quality
of life and human rights. The total lack of questioning of a neoliberal model that generates systemic crises and that in decades of its existence has not been able to eliminate or substantially reduce poverty and inequality, causes us to continue with the concerns that we have been pointing out since the crisis
began:

a) There is an urgent need for a new International Financial Architecture where financial flow is regulated and supervised. In this framework, countries require control of capital and monetary regulation to limit the entry of speculative currencies that generate problems of liquidity and affect the entrepreneurial sectors of the population. The financial regulation will generate autonomy to
implement public policies for those countries, as well as highlight the role to comply with regional regulatory frameworks that will contribute to those financial systems that are better aligned to achieving the public good in each region. To give impulse to a comprehensive debate on these
themes we propose the creation of a Financial Code and another look at the proposals of the Stiglitz Commission, in order to create an International Body for Financial Regulation and a World Economic Council, both of which would function within the UN framework.

b) International collaboration is essential to get out of the crisis and generate more equitable conditions between countries. But this cannot be understood solely as monetary cooperation and freedom for the movement of capital, as alluded to in the last meeting of the IFIs. The Developing Countries are the most affected by the crisis and the model that generated it, and for this they
require resources to reduce the social differences characteristic of each region. To this end, the following is necessary:

 a moratorium of the debt that generates liquidity to countries in order for them to attend to social priorities first, rather than financial priorities;

 audits of the debt that enable illegal and illegitimate debts to be identified and not pay them;

 resources to confront the crisis, that will be provided by the industrialized countries that created it, as reparation for the damage caused;

 other debt management, through an equal treatment between the IFIs and countries that respects the sovereignty of the alter and without conditions that impede the liberty of the States to implement the public policies that they require; and

 a true Tax Justice based on taxes on profits before consumption, that enable a better redistribution of income and that help to substantially appraise the sectors and industries that create negative impacts on the environment and on society.

c). We support the proposals of the Round Table on Finance at the Cochabamba Summit, as well as the initiatives on equitable financing from various sectors: end subsidies for fossil fuels, tax industry in accordance with its environmental impact and other international levies. In addition, we support the G77+China proposal for the industrialized countries to contribute between 0.5% and 1% of their GNP Gross National Product
GNP The GNP represents the wealth produced by a nation, as opposed to a given territory. It includes the revenue of citizens of the nation living abroad. to combat climate change.

d). Latin American should consolidate its process of integration, promoting the UNASUR (Union of South America nations). Within this framework, it is strengthening the regionalization process of the global finance. Appears to be a fundamental compliment to generate better autonomy, recover financial resources and facilitate sustainable development. Specifically, it needs:

 Institutions frameworks that back sustainable development with Bank of the South that helps small-scale production, social wellbeing, and technological and scientific development that supports a sustainable economy.

 A Regional Reserve System so that the region has autonomy and liquidity before eventualities in the balance of payments Balance of payments A country’s balance of current payments is the result of its commercial transactions (i.e. imported and exported goods and services) and its financial exchanges with foreign countries. The balance of payments is a measure of the financial position of a country vis-à-vis the rest of the world. A country with a surplus in its current payments is a lending country for the rest of the world. On the other hand, if a country’s balance is in the red, that country will have to turn to the international lenders to meet its funding needs. and a system away from the dollar that will limit the contagion of a future crisis and the dependence on the international bank for the financing of local production.

 A Regional Financial Regulatory Framework that establishes the rules for an efficient and effective functioning of financial institutions in the region, within a perspective of sustainable development, along with regulatory instruments to be used by States to intervene in failing markets.

The G-20 has proven that it has no interest in improving the rules of the game for all. Instead it seeks ‘systematic stabilization’, so that capitals return to having exorbitant profits thus leading the world to believe that the economy is growing. However, post-crisis unemployment in Latin America added 39
million to the total 189 million Latin Americans living under the poverty line in total; the coefficient for inequality in the region is 0.53, making it the most unequal region in the world. It is estimated that more than 100,000 million dollars a year are needed so that the Developing Countries can face the
environmental problems created by the industrialized world but they are yet to commit to providing this. The G-20 should not be the space to debate global problems and decide on the implementation of proposals that concern the whole world because it is a group that represents just 10% of the countries
in the world. Therefore, to legitimize them as drivers of the international economy will consolidate that those who have and produce more Money are the ones to have more rights on the decision making, above the rest of the population.

In view of this we re-vindicate our demands for the creation of a new international financial architecture, with capital controls and financial regulation, along with other debt management and debt auditories. Further, we demand resources to confront the financial crisis, a true tributary justice, and resources to deal with climate change and promote UNASUR.