G8: The way to hell is paved with good intentions

4 July 2005 by Eric Toussaint , Damien Millet

On June 7, 2005, following a meeting with British Prime Minister Tony Blair, George W. Bush declared: “Our countries are working on a proposal which will eliminate 100% of the debt of the most impoverished countries”. Four days later in London, the ministers of finance of the G8 G8 Group composed of the most powerful countries of the planet: Canada, France, Germany, Italy, Japan, the UK and the USA, with Russia a full member since June 2002. Their heads of state meet annually, usually in June or July. countries announced an agreement described as historic: the cancellation of the debt owed by 18 poor countries to the 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.

, the African Development Bank (ADB) and 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.

(IMF) - a debt of some 40 billion dollars. Eventually, 20 other countries could become beneficiaries, bringing the total to 55 billion dollars. The Gleneagles G8 summit from July 6 to 8 and the annual Assembly in September of the IMF and the World Bank, which have not yet made their own views known, are expected to confirm this announcement. But the hidden side of this promise has transformed an apparent fairy tale into a genuine tragedy.

This is because announcements of this kind have been made before, and each time, the failure has been dismal in terms of human development. For example the Heavily Indebted Poor Countries Heavily Indebted Poor Countries
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.
(HIPC) initiative, launched in 1996 and reinforced in 1999, was supposed, according to the World Bank and the IMF, to enable the 42 countries concerned to meet “all their present and future obligations in external debt servicing without debt rescheduling Debt rescheduling Modification of the terms of a debt, for example by modifying the due-dates or by postponing repayments of the principal and/or the interest. The aim is usually to give a little breathing space to a country in difficulty by extending the period of repayment and reducing the amount of each instalment or by granting a period of grace during which no repayments will be made. or accumulating arrears and without weakening their economic growth”. To achieve this, it planned to enforce neo-liberal economic reforms along exactly the same lines as the 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/
programmes which since 1980 have inflicted great hardship on the people of the South: increases in school fees, health-care Care Le concept de « care work » (travail de soin) fait référence à un ensemble de pratiques matérielles et psychologiques destinées à apporter une réponse concrète aux besoins des autres et d’une communauté (dont des écosystèmes). On préfère le concept de care à celui de travail « domestique » ou de « reproduction » car il intègre les dimensions émotionnelles et psychologiques (charge mentale, affection, soutien), et il ne se limite pas aux aspects « privés » et gratuit en englobant également les activités rémunérées nécessaires à la reproduction de la vie humaine. costs and VAT, removal of subsidies for basic products - four measures which affect the poor in particular; privatisations, trade liberalisation and the creation of unfair competition between local producers and transnational corporations. This generally leads to serious deterioration in the living conditions of the majority of the population and to a form of re-colonisation. In reality, major decisions are now taken in Washington (headquarters of the World Bank and the IMF) and at the Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.


Once the plan reached completion, it was intended that a country’s debt would be sufficiently reduced to allow that country to resume regular repayments. The meagre funds made available were supposed to finance some social costs with a view to reducing poverty, thus seeming to respond to protesters’ demands but without calling into question the logic that led to over-indebtedness and abject poverty. The announcement of the reinforcement of the HIPC initiative in June1999 was as triumphant as the announcement of June 2005: 100 billion dollars of debt were to be cancelled, and poverty was to be drastically reduced. In short, it was historic.

Today the situation is disastrous: less than half of the Heavily Indebted Poor Countries have completed the process that should have been concluded at the end of 2004 but which had to be extended to avoid a fiasco. The bombastic announcements deflated like an old balloon: not only was there no sign of the 100 billion dollars, but between 1999 and 2003, the external public debt of the 18 countries concerned by the London announcement - precisely the ones that had completed the terms of the HIPC initiative - rose from 68 to 73 billion dollars. [1]

40 billion dollars out of 73 do not make 100%... Should we not be pushing for an alternative solution rather than the repetition of a clear-cut imposture? Far from solving the debt problem, the London announcement is, more than anything else, proof of the failure of the HIPC initiative: why, otherwise, would the debt of these 18 countries need to undergo a further reduction?

In reality, under the pressure of public opinion and international solidarity organisations, the G8 leaders are once again making a false concession. The HIPC initiative, which was portrayed as a major step forward, did not erase the debt of these poorest countries. Worse still, because of the conditions involved, it reinforced their dependence with regard to the outside world, increased social inequalities, and seriously affected the quality of public services.

The reaction of the world’s financial leaders to the tsunami of December 2004 is another example of false generosity: the decision to offer a moratorium on the debt of Indonesia and Sri Lanka was presented as the acknowledgement of “the exceptional magnitude and devastating effects of this disaster”, but this moratorium is in fact liable to late payment penalty 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. and these countries will finally be repaying more than if the tsunami had not occurred. The way to hell is paved with good intentions, as the saying goes.

The cancellation of a part of the debt of the 18 countries (representing only 5% of the population of 165 developing countries) is anything but a gift: it is a small compensation for the neo-liberal straitjacket that they have been forced into for many long years. These 18 countries, with the connivance of their leaders, are under creditor control: the noose of debt - the tool of their domination - can therefore be loosened slightly.

But the annual amounts to be released are derisive compared with the scale of needs. Initial projections indicate that the 18 countries will save some 1 billion dollars per annum, which could be deducted from the aid they will receive if they fail to meet the docility criteria imposed by the rich countries reimbursing on their behalf. In fact, what is needed is not a pathetically meagre and hypothetical billion dollars. 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).

) has estimated at 80 billion dollars per annum the sum required to guarantee - over ten years - universal access to clean water, decent nourishment, primary education and basic health care. Finding this sum is a matter of political good will: each year, the G8 countries devote 700 billion dollars to military expenditure and 350 billion dollars to agricultural subsidies that dramatically penalise small Third World producers [2]. Just two months away from a UN summit focussing on delays in meeting the Millennium Development Goals, the G8 - a body without legitimacy - is “generously” offering a homeopathic dose of cancellation combined with continued application of neo-liberal shock treatment.

The relentless machine that creates debt and poverty is still in full operation; the G8 protects it by diverting attention through deceitful superlatives. We call for a radical change of logic: total and unconditional cancellation of the debt of developing countries, and development financing in line with real social needs through a massive redistribution of wealth on the planet.

Damien Millet is a professor of mathematics, President of The Committee for the Cancellation of Third World Debt (CADTM)-France. Eric Toussaint is a historian and political scientist, President of CADTM-Belgium. He is the author of Your Money or Your Life. The Tyranny of Global Finance, Haymarket, Chicago, 2005. Damien Millet and Eric Toussaint are co-authors of The Debt Scam, Vak, Mumbai, 2003 and Who Owes Who?, Zed Books, London, 2004.

Translated by Ngozi ONU and Judith HARRIS.


[1Authors’ calculation based on World Bank Global Development Finance 2005.

[2In 2004 alone, all the developing countries combined reimbursed the astronomical sum of 374 billion dollars (source: World Bank, Global Development Finance 2005).

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: https://en.wikipedia.org/wiki/%C3%89ric_Toussaint
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 (621)

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Damien Millet

professeur de mathématiques en classes préparatoires scientifiques à Orléans, porte-parole du CADTM France (Comité pour l’Annulation de la Dette du Tiers Monde), auteur de L’Afrique sans dette (CADTM-Syllepse, 2005), co-auteur avec Frédéric Chauvreau des bandes dessinées Dette odieuse (CADTM-Syllepse, 2006) et Le système Dette (CADTM-Syllepse, 2009), co-auteur avec Eric Toussaint du livre Les tsunamis de la dette (CADTM-Syllepse, 2005), co-auteur avec François Mauger de La Jamaïque dans l’étau du FMI (L’esprit frappeur, 2004).

Other articles in English by Damien Millet (46)

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