Post-imperialist North-South financial relations? What Norway really owes African ‘debtors’

8 January 2007 by Patrick Bond

1. Introduction

Global reforms have been few and far between since neoliberalism took hold at the world scale during the 1980s, especially in financial markets: from the 1982 Third World debt crisis outbreak in Mexico, via hundreds of major riots across the South against 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).

policies, to the mid-late 1990s emerging markets crashes (whose epicenter was also Mexico in 1994) and Joe Stiglitz’s late 1990s ‘Post-Washington Consensus’ gambit at 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.

, to the status quo UN Financing for Development summit in 2002 (also held in Mexico) and subsequent failures to democratize the Bretton Woods Institutions during the 2000s - notwithstanding the election of mainly centre-left and left governments in Latin American.

Is there, finally, a new day dawning from one of the northernmost capitals, Oslo? Can a post-imperialist financial agenda emerge thanks to Norwegian leadership? The October 2005 Soria Moria Declaration of the governing coalition set some high standards for shifts in North-South financial relations:

Norway must adopt an even more offensive position in the international work to reduce the debt burden of poor countries. The UN must establish criteria for what can be characterised as illegitimate debt, and such debt must be cancelled.
The Government will...:

* work to ensure that the multilateral aid is increasingly switched from the World Bank to development programmes and emergency aid measures under the auspices of UN agencies. Norwegian aid should not go to programmes that contain requirements for liberalisation and privatisation, act as a spearhead for international agreements on new global financing sources that can contribute to a redistribution of global wealth and the strengthening of the UN institutions, such as aircraft tax, carbon dioxide tax, tax on arms trade or duty on currency transactions,...
* work for greater openness about Norway’s role in the World Bank and 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.
and evaluate changes in the political management and mandate for Norway’s role,
* support a democratisation of the World Bank and the IMF. Developing countries must be given much greater influence, among other things by ensuring that the voting right is not solely linked to capital contributions,
lead the way in the work to ensure the debt cancellation of the poorest countries’ outstanding debt in line with the international debt relief initiative. The costs of debt cancellation must not result in a reduction of Norwegian aid, cf. the adopted debt repayment plan. No requirements must be made for privatisation as a condition for the cancellation of debt. The Government will support the work to set up an international debt settlement court that will hear matters concerning illegitimate debt. [1]

These are excellent promises, reflecting strong lobbying by the progressive Norwegian civil society organisations like the debt movement Slug, and a high level of social consciousness about the ills of corporate globalization.

Within a year, several events indicated the potential for at least partial implementation of Soria Moria. In October 2006, after many years of discussion, the Norwegian government cancelled debt dating to the late 1970s Shipping Export Credit Campaign. The following month Oslo hosted - and made a successful bid for the secretariat position of - the Extractive Industries Transparency Initiative, allowing critics of petro-mineral corruption a platform that was shared, ironically, with World Bank president Paul Wolfowitz. A few weeks later, the government’s conference on the World Bank and International Monetary Fund (IMF) considered whether neoliberal conditions were still being imposed on Third World debtors. When, a few days later, the Nobel Peace Prize was given to an anti-poverty financier, Muhammad Yunus of Grameen Bank, the Oslo Nobel committee appeared to be acting consistent with the government’s agenda of putting a human face on globalization and capitalism.

Together, at first blush, these initiatives appear to potentially shake post-Cold War North-South power relationships, and to suggest new prospects for a social-democratic reform agenda for global governance. However, much deeper dilemmas remain, because some of the Norwegian reforms legitimate the existing system rather than confronting and weakening it.

In making an assessment of debt and financial institutions, the first factor to take into account is the adverse 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 forces at the global scale, given the fusion of neoliberal and neoconservative institutions and personnel.

2. The balance of forces and the neocon hijacking of the UN

Should Norway support the UN instead of the World Bank, as Soria Moria insists? During the 1990s, Western donors (including Scandinavians) had effectively united with the Bretton Woods Institutions via the Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.

, drawing in UN agencies and large corporations, with nearly uniform cooperation by Third World elites. The result was a fairly coherent neoliberal bloc which by the early 2000s was taken over by notable neoconservative officials:

* the European Union chose Spanish neoconservative Rodrigo Rato as IMF managing director in mid-2004;
* the new head of UNICEF, chosen in January 2005, was Bush’s agriculture minister Ann Veneman, although the USA and Somalia are the only two out of 191 countries which refused to ratify the United Nations Convention on the Rights of the Child;
* for another key UN post in February 2005, the outgoing neoliberal head of the World Trade Organisation WTO
World Trade Organisation
The WTO, founded on 1st January 1995, replaced the General Agreement on Trade and Tariffs (GATT). The main innovation is that the WTO enjoys the status of an international organization. Its role is to ensure that no member States adopt any kind of protectionism whatsoever, in order to accelerate the liberalization global trading and to facilitate the strategies of the multinationals. It has an international court (the Dispute Settlement Body) which judges any alleged violations of its founding text drawn up in Marrakesh.

, Supachai Panitchpakdi from Thailand (who served US and EU interests from 2003-05), was chosen to lead the United Nations Conference on Trade and Development UNCTAD
United Nations Conference on Trade and Development
This was established in 1964, after pressure from the developing countries, to offset the GATT effects.

* Paul Wolfowitz - the architect of the illegal US/UK/Coalition of the Willing war against Iraq - was appointed by Bush to head the World Bank in March 2005;
* the European Union’s hardline trade negotiator Pascal Lamy won the directorship of the World Trade Organisation a few weeks after that; and
* to ensure that Washington’s directives to the United Nations continued to be as explicit as possible, Bush appointed John Bolton as US Ambassador in mid-2005, and although he departed in December 2006, his replacement will have the same bullying mandate. [2]

According to Phyllis Bennis of the Institute for Policy Studies,
many of the secretary-general’s top staff were replaced over the last two years or so with active supporters of the US agenda for the United Nations. That effort includes the US-orchestrated replacement of Kofi Annan’s longstanding chief of staff Iqbal Riza with Mark Malloch-Brown (who called Bolton‘very effective’), and the appointment of Bush loyalist and right-wing American State Department official Christopher Burnham as undersecretary-general for management. [3]

In one telling incident in late 2006, Bush appointed a US State Department official, Josette Sheeran, as director of the World Food Programme. Sheeran had a two-decade association with Rev Sun Myung Moon’s Unification Church and during the 1990s was managing editor of Moon’s Washington Times newspaper, one of the most ideologically rightwing major publications in the world. Annan’s replacement, Ban Ki-moon, is alleged to have intervened to ensure Sheeran got the job. [4]

In sum, it appears that multilateral institutions - not just the Bretton Woods and WTO but also the UN System - are incapable of moving to a reform agenda, given the power of hard-right forces. This would suggest that a rewording of Soria Moria is needed, so that if Bretton Woods funds are ‘switched from the World Bank to development programmes and emergency aid measures under the auspices of UN agencies’, then those agencies should move away from mimicking Bretton Woods policies (as most now do, with the exception of the UN Research Institute for Social Development) and supporting reactionary US social policies.

Norway lines up in this context as the most progressive of Northern states, even though its centre-left policies are rather tame by historical standards. But with the Washington Consensus ideology being contested at an unprecedented rate by both Latin American governments and civil society activists, can Norway do more? Is Norwegian International Development Minister Erik Solheim playing a genuinely oppositional role, or has he slipped too quickly into alignment with the neolib/neocon institutions? A good case study is debt.

3. From debt relief to repudiation to reparations

One objective of the neoliberal/neoconservative bloc remains the extraction of Third World debt payments to the maximum amount possible, while still maintaining the global financial system’s overall legitimacy. The Third World debt crisis broke in 1982 and required a massive new role for the World Bank and IMF, which lent new monies so that 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. on old loans could be repaid to the New York, Frankfurt, London, Zurich, Paris and Tokyo banks most exposed. Northern interests were to prevent financial crashes in Southern countries from affecting their banks, and by 1987 most Northern banks had indeed covered their debts. The period was spent by wretched countries exporting more raw materials at ever-lower prices so as to repay vast sums to the World Bank and IMF. Structural Adjustment Programmes (SAPs) were imposed, financial markets liberalised, and capital flight made matters far worse during the early 1990s.

From 1996, in order to restore legitimacy to this inequitable system, the Bank and Fund began their Highly Indebted Poor Countries (HIPC 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.
) initiative, which was subsequently criticized on several grounds: it was too little too late; there were too many neoliberal conditions associated with SAPs; the origins of the debt were not considered; and many highly-indebted countries with severe debt problems - e.g., Nigeria, Indonesia and Argentina - did not quality.

In part because debt relief was meant to maintain the system intact at a time of growing resistance (several hundred ‘IMF Riots’ had forced several dozen governments out of power between the mid1980s-mid1990s), practically no significant debtors - aside from ‘failed states’ or those suffering civil wars - which self-consciously defaulted. Exceptions included Zimbabwe in 1999 and then Argentina in 2002, but those two counterexamples gained the courage to renege on repaying $5 billion and $140 billion, respectively, only because they had run out of hard currency. Other occasional defaults, such as by Nigeria during the early 2000s, were quickly reversed.

African grassroots activists, in contrast, lobbied for debt repudiation. In 2001, Jubilee South’s ‘Pan African Declaration on Poverty Reduction Strategy Papers’ (PRSPs) argued that, on the basis of the long, deep and painful experiences of SAPs in our countries, we reject:

• SAPs in any form or with any cosmetic ‘adjustments’;
• PRSPs as the latest version of structural adjustment;
• HIPC initiative as debt ‘relief’;
• all SAP HIPC PRSP Poverty Reduction Strategy Paper
Set up by the World Bank and the IMF in 1999, the PRSP was officially designed to fight poverty. In fact, it turns out to be an even more virulent version of the structural adjustment policies in disguise, to try and win the approval and legitimation of the social participants.
conditionalities in order to be granted debt ‘relief’;
• ‘relief’ of only a portion of debt and continued repayment of the remaining debt which will simply ensure continued control and domination;
• any attempt to use our organisations to legitimise structural adjustment, HIPCs, PRSPs or debt ‘relief’;
• any further role or interference of the World Bank or IMF in our countries... We as African civil society organisations need to... mobilise our people and link up with our allies in the South, and partners in the North, for immediate and total cancellation of our external debts without external conditionalities;... mobilise to encourage and push our governments to stand together and repudiate the debt; mobilise our people to challenge and change the global economic system through campaigns and actions to shut down the World Bank and IMF and to stand up to other forces, including the WTO, Northern governments such as the EU (through the Cotonou Agreement) and the US (through AGOA), as well as their TNCs; and mobilise our peoples to oppose the ruling elites who are implementing structural adjustment programmes and further entrenching neo liberal policies in our countries. [5]

In part due to a decline in post-Cold War foreign aid flows from 1990-2002, Africa’s debt crisis worsened during the era of globalization. From 1980-2002, Sub-Saharan Africa’s total foreign debt rose at a faster rate than that of Latin America, the Caribbean and the Middle East: from $61 billion to $206 billion, and the ratio of debt to 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.
soared from 23% to 66%. [6]

By the early 2000s, the debt remained unbearable for at least 21 African countries, at a level at more than 300% of export earnings. In at least 16 countries, a very strong case could be made that the inherited debt from dictators is legally ‘Odious’, since the citizenry were victimized both in the debt’s original accumulation (and use against them), and in demands that it be repaid: Nigeria under the Buhari and Abacha regimes from 1984-98 ($30 billion), South Africa under apartheid from 1948-93 ($22 billion), the DRC under Mobuto from 1965-97 ($13 billion), Sudan under Numeiri from 1969-85 ($9 billion), Ethiopia under Mengistu from 1974-91 ($8 billion), Kenya under Moi from 1978-2002 ($5.8 billion), Congo under Sassou from 1979-2005 ($4.5 billion), Mali under Trore from 1968-91 ($2.5 billion), Somalia under Siad Barre from 1969-91 ($2.3 billion), Malawi under Banda from 1966-94 ($2.2 billion), Togo under Eyadema from 1967-2005 ($1.4 billion), Liberia under Doe from 1980-90 ($1.2 billion), Rwanda under Habyarimana from 1973-94 ($1 billion), Uganda under Idi Amin Dada from 1971-79 ($0.6 billion) and the Central African Republic under Bokassa from 1966-70 ($0.2 billion). [7] Other undemocratic countries - including Zimbabwe under Mugabe in recent years ($4.5 billion) - could also be added to this list, which easily exceeds 50% of Africa’s outstanding debt.

Following the failure of HIPC to make a dent in the debt, the June 2005 finance ministers meeting made debt relief concessions for 18 countries which were near or at the HIPC ‘completion point’. HIPC debt relief largely applied to loans that weren’t being paid in any case. Most of the 18 countries (14 of which are African) have vast debts that can never be repaid; the countries are, in accounting terms, bankrupt. The notional reduction of these debts is effectively meaningless. [8]

According to GreenLeft Weekly:

While the $1.5 billion a year made available will certainly be of use for the 18 poverty-stricken countries, it will only boost their collective budget by about 6.5% per annum. The modest sum illustrates that the Western media’s backslapping over their governments’ ‘generosity’ is more than a little exaggerated and somewhat premature. Those 18 countries account for only 5% of the population of the Third World, and if all 38 countries become eligible in the future, it will still only affect around 11%. [9]

African and global justice advocates offered harsh condemnations, including the African Network and Forum on Debt and Development based in Harare: ‘Nothing short of the continuation of the chains of slavery and bondage for the citizens in those countries... The agreement does not address the real global power imbalances but rather reinforces global apartheid. [10]

Another factor to incorporate is the rise of debt offered by China, especially to Angola ($2 billion in 2005) and Zimbabwe ($200 million in 2006). These loans and many others still to come suggest that as debt loads marginally lighten, the Chinese will use financial resources to expand their geopolitical agenda. The key problem is that the US establishment, backed by much of Europe, is against any Chinese expansion, sensing long-term inter-imperial rivalries. Keeping China at bay using human rights rhetoric appears to be coming into fashion, and Norway’s government and NGOs should avoid becoming useful idiots to Washington as a result of this pressure, and instead help develop Africa-China people-people links so as to develop appropriate policy positions.

4. Norwegian debt cancellation

How, then, does Norway’s own debt cancellation in late 2006 compare? There are NOK 4,4 billion in outstanding loans from Norway to the Third World. Of that amount, more than two thirds came from the Norwegian Ship Export Campaign during the late 1970s, when 156 ships were sold for NOK 3.7 billion to 21 countries via the Norwegian Guarantee Institute for Export Credits’. Within ten years, Gro Harlem Brundtland had determined that the campaign was economically unsustainable, benefiting Norway more than the countries, by maintaining its dying ship-building industry a bit longer. A further eighteen years later, after vast repayments on the illegitimate loans, the following countries still owe for the ships plus interest in arrears:

Myanmar: NOK 1 579 million
Sierra Leone: NOK 60 million
Sudan: NOK 772 million
Peru: NOK 48 million
Ecuador: NOK 225 million
Jamaica: NOK 19 million
Egypt: NOK 168 million

The write-off only affects Myanmar (Burma) and Sudan once they are readmitted to international financial markets, while Sierra Leone must still go through its HIPC completion. The cost to the Norwegian government of the debt cancellation, it estimates, will be only NOK 577 million between 2007-21.

A close examination is needed, especially in relation to whether reparations should be paid by Norway to countries which already repaid loans for the ships. Debt campaigner John Jones of Networkers South North explains:

1. Norway has accepted co-responsibility for the debt tragedy. That is new. They have, however, not accepted the concept of ‘illegitimacy’. So the victory for the NGOs is only partial, albeit a significant partial one. It seems as if it has been important for the government of Norway to accommodate the debt cancellation demand without upsetting the World Bank and the other major finance powers. And that is no good sign. To break this institutional loyalty will be the toughest challenge in the time to come. The new Norwegian government will have to prove it will change its former pro-World Bank attitude and follow up its basic policy paper on this issue. It will mean a change of mind or manpower in the bureaucracy at the Ministry of Foreign Affairs, and is no small task.

2. If the loans were granted on wrong premises, Norway should follow their logic to go into the question of repayment of money gone to serve these loans. In the case of Ecuador more than $100 million has been repaid over the years to downpay $24 million. Originally the loan was only $59 million. The remaining $35 million has been ‘forgiven’ today. Hugo Arias’ alleged claim that Norway should return the $100 million is well taken and correct. The original loan was misplaced and should be considered as part of internal Norwegian subsidy of shipyards and be financed as such. Ecuador is a good example to show the story of debt and debt-payments.

3. The ‘forgiveness’ of Sierra Leone’s debt is pending on that country’s reaching the World Bank HIPC completion points. It so happens that Norway does not accept privatization conditionalities any longer, but has not detected what it means for Sierra Leone to ‘reach completion points’ - yes - it implies privatization. Someone at the ministry has not done their job. NGOs still will have to do it for them when it comes to keeping financial actors accountable. [11]

In addition to the points above, consistent with Jubilee Africa activists’ viewpoints, there is the matter of the debt that Norway owes to the Third World due to its excessive use of the earth’s nonrenewable resources.

5. Norway’s ecological debt to the South

As the world’s third-largest oil exporter, Norway is one of the countries most implicated in CO2 emissions. At roughly 10 tonnes of CO2 per person, the Norwegian people are responsible for more than 100 times as much greenhouse gas activity as people in Niger, and ten times the global per capita average. [12] Africa’s role as a ‘sink’ for such emissions is just one of the ways that environmentalists calculate the debt the North owes the South.

During the early 1990s, the idea of the North’s ecological debt to the South began gaining currency in Latin America thanks to NGOs, environmentalists and politicians (including Fidel Castro of Cuba and Virgilio Barco of Colombia). According to Joan Martinez-Alier, ‘Ecologically unequal exchange is one of the reasons for the claim of the Ecological Debt. The second reason for this claim is the disproportionate use of Environmental Space by the rich countries. [13] In the first category, Martinez-Alier lists:

* Unpaid costs of reproduction or maintenance or sustainable management of the renewable resources that have been exported;
* actualized costs of the future lack of availability of destroyed natural resources;
* compensation for, or the costs of reparation (unpaid) of the local damages produced by exports (for example, the sulphur dioxide of copper smelters, the mine tailings, the harms to health from flower exports, the pollution of water by mining), or the actualized value of irreversible damage;
* (unpaid) amount corresponding to the commercial use of information and knowledge on genetic resources, when they have been appropriated gratis (‘biopiracy’). For agricultural genetic resources, the basis for such a claim already exists under the FAO’s Farmers’ Rights.

In the second, he cites ‘lack of payment for environmental services or for the disproportionate use of Environmental Space’:

* (unpaid) reparation costs or compensation for the impacts caused by imports of solid or liquid toxic waste;
* (unpaid) costs of free disposal of gas residues (carbon dioxide, CFCs, etc), assuming equal rights to sinks and reservoirs.

The sums involved are potentially vast. Vandana Shiva and Yash Tandon estimate that biopiracy of ‘wild seed varieties have contributed some $66 billion annually to the US economy. [14]Recent biopairy cases include a diabetes drug produced by a Kenyan microbe; a Libyan/Ethiopian treatment for diabetes; antibiotics from a Gambian termite hill; an antifungal from a Namibian giraffe; an infection-fighting amoeba from Mauritius; a Congo (Brazzaville) treatment for impotence; vaccines from Egyptian microbes; multipurpose medicinal plants from the Horn of Africa; the South African and Namibian indigenous appetite suppressant Hoodia; and many others. [15]

In the case of CO2 emissions, according to Martinez-Alier,
Jyoti Parikh (a member of the UN International Panel on Climate Change) [argues that] if we take the present human-made emissions of carbon, the average is about one tonne per person per year... Let us take an average of $25: then a total annual subsidy of $75 billion is forthcoming from South to North. [16]

Depletion of minerals and other nonrenewable resources, dumping of toxics, biopiracy and excess use of the planet’s CO2 absorption capacity are merely some of the many ways that the South is being exploited by the North - including Norway - on the ecological front. Africans are most exploited in this regard because non-industrialized economics have not begun to utilize more than a small fraction of what should be due under any fair framework of global resource allocation. The amounts involved would easily cover debt repayments. Norway should move much more decisively to raise this issue, consistent with Soria Moria.

6. Conditionalities on loans and debt relief

According to Erik Solheim, addressing the November 2006 conference on conditionalities, ‘We are not saying that liberal economic policies and privatisation are wrong. But it should be a choice of that country - through a democratic debate - not one made by international lenders or institutions. [17] Solheim has not only missed an excellent opportunity to indeed say neoliberalism is ‘wrong’, he also neglects to consider the political content behind conditionality. This was also something that two major internal World Bank reviews in 2005-06 failed to do, in arguing the case that conditions on loans and debt relief have diminished, or that they simply assist toward broader objectives including borrower ownership, harmonisation, customisation, criticality, transparency and predictability. [18]

At least three critical NGO studies during 2005-06 found increases in neoliberal conditionality, in part by showing how definitional tricks by the Bank erased the problem without even identifying it. [19] According to these and other civil society critiques put forward to the Norwegian Conference on Conditionality,

* Aggregate World Bank and IMF economic policy conditions rose on average from 48 to 67 per loan between 2002 and 2005;
* World Bank and IMF continue to put conditions on privatisation and liberalization despite the acknowledged frequent failures of these policies in the past;
* The Bank does not give enough space for governments to define their own policies;
* The continuing secrecy of World Bank and IMF negotiations with borrowing country governments inhibits the development of genuine broad based ‘ownership’ and leaves reform programmes open to the accusation that they have been illegitimately forced on governments by the Bank;
* IMF macroeconomic conditions, especially high 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.
aimed at combating moderate levels of 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. and stringent fiscal policies, impair much needed spending on social and economic development. [20]

Three Norwegian researchers contracted by the foreign ministry - Benedicte Bull, Alf Morten Jerve and Erlend Sigvaldsen - found that in forty Poverty Reduction Growth Facility loans, ‘privatization is a condition in over half... In addition, 10 of the programs described in detail the privatization plans of the government, but these were not included in the policy conditionalities. That means that in only 7 of the 40 cases did privatization not figure as an important element of the PRGF. [21]

The Bull report is critical, to be sure. However, those in power might make the case that allegedly pragmatic changes warrant ongoing Norwegian support, particularly in relation to discontinued user fees for health and education, as well as water/energy utility practices. As the consultants claim, ‘All indications are that the IFIs have changed thinking and even practice with regard to privatization and liberalization conditionalities in the utility sector, allowing a wider specter of alternatives and increasing the emphasis on government as an important player.’

Yet it is also widely known that because of lower profits, economic problems in expanding supply grids to poor people, problems with currency conversions for 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. repatriation and rising social resistance, the once inexorable march of European and US water firms into the Third World reversed beginning in 1998. This was the main basis for recommendations by the 2002-2003 Camdessus Commission for dramatic increases in publicly-subsidised risk insurance for water privatisers like the French firm Suez, which lost large amounts due to the political and financial meltdown in Argentina.

In short, it appears that in some crucial ways, the Norwegian consultants missed ‘the devil in the details’, and thus offer a less critical analysis than is warranted. This is reminiscent of the kind of thinking in Norad during the early 2000s, in which - as the agency’s website still claims in December 2006 (in a document not updated since May 2004) - ‘The increased focus in Norad on private sector development has in turn led to greater focus on developing countries’ financing of their own development. Efforts to increase tax revenues, provide savings opportunities for the population and provide possibilities for creating local investment capital have become more central components of development cooperation.’ A key element of this neoliberal strategy, microfinance, is considered below.

7. World Bank democratization ?

It remains to be seen whether Solheim follows through on the promised shift of funds out of the World Bank. One crucial feature would be the institution’s democratization, a project contradicted by the presidency of Paul Wolfowitz since June 2005.

As US ambassador to Indonesia during the 1980s, Wolfowitz had shored up the dictatorship of president Suharto. He regularly bragged about the strong role of US oil companies in Indonesia, but not once went on record against the myriad abuses which finally in 1998 led to such intense street riots that Suharto was thrown out. [22] As a military bureaucrat, instead of serving the cause of democracy, Wolfowitz had a history of promoting unashamed US imperialism. By 1992, for example, Wolfowitz worked as chief strategist for US defence secretary Dick Cheney, where his Defense Planning Guidance memo advised: ‘Our first objective is to prevent the re-emergence of a new rival... We must maintain the mechanisms for deterring potential competitors from even aspiring to a larger regional or global role. [23]

Competitors like China may have been deterred by the naked aggression Wolfowitz demonstrated when he justified the US invasion choice of Baghdad, instead of a site which really did control weapons of mass destruction, Pyongyang: ‘The most important difference between North Korea and Iraq is that economically, we just had no choice in Iraq. The country swims on a sea of oil. [24] Wolfowitz also told Vanity Fair that the rationale for the invasion of Iraq was one of political convenience, not honesty: ‘For reasons that have a lot to do with the US government bureaucracy, we settled on the one issue that everyone could agree on which was weapons of mass destruction as the core reason. [25]
As for Iraqi resistance, ‘It’s hard to conceive,’ Wolfowitz told Congress three weeks before the invasion, ‘that it would take more forces to provide stability in post-Saddam Iraq than it would take to conduct the war itself and to secure the surrender of Saddam’s security forces and his army. Hard to imagine.’ Moreover, ‘The idea that [cost of war estimates are] going to be eclipsed by these monstrous future costs ignores the nature of the country we’re dealing with,’ he lectured Congress, going on to explain that Iraq had ‘$10 to $20 billion in frozen assets from the Gulf War,’ and generated ‘on the order of $15 billion to $20 billion a year in oil exports. There’s a lot of money there,’ he insisted, ‘and to assume that we’re going to pay for it is just wrong. [26]

At the Bank, Wolfowitz’s Republican Party cronies were accused of receiving ‘excessive pay and open-ended contracts’ by Bank staff who filed a complaint to the Department of Institutional Integrity’s whistleblower hotline, and the Bank Staff Association complained that standard hiring procedures were ignored for Wolfowitz’s main appointments. [27]

Still, there is no question that as Bank president, including at his October 2006 appearance in Oslo, Wolfowitz complained - appropriately in some cases - of unfair Northern trade subsidies, meagre US aid and corruption. This was merely newly-learned superficial rhetoric, veiling the sinister agenda of the petro-military complex, as shown in August 2005 in Ecuador. There, the centrist government employed a Keynesian finance minister, Rafael Correa, who renewed Ecuador’s long-standing $75 million tax-avoidance complaint against Occidental Petroleum. Wolfowitz specifically opposed a new law which would redirect 20% of an oil fund towards social needs and 10% for national development in science and technology, instead of debt servicing to foreign banks. (The windfall from the oil price rise from $18/barrel when the fund was set up, to $70/barrel in 2005, was being directed to creditors.) Correa aimed to rescind Occidental’s control of the oilfields, as the original contract allowed for under conditions of non-performance. Under pressure from Wolfowitz, he was fired - but in December 2006 was elected the country’s president. [28]

In other settings - including Chad, Ethiopia, Kenya, India, the DRC’s Katanga province, and Haiti - there were ongoing controversies about Wolfowitz’s heavy hand, either supporting dictators, slapping them on the wrist, or using financial muscle in a manner consistent not with transparency and anti-corruption principles but instead, US foreign policy. There was no clearer case than Iraq, where resistance to Bank and IMF dictates began shortly after the new president took office. The Bank had agreed to co-administer the International Reconstruction Fund Facility for Iraq and World Bank Iraq Trust Fund in 2003, thus coordinating much international aid funding. With Wolfowitz second in command, the Pentagon short-changed the reconstruction programme notwithstanding the immense damage done by US/UK bombing. As hundreds of project promises were broken, the Bank took the opportunity, just one month after Wolfowitz became president, to prepare paperwork for $500 million in International Development Association loans for Iraq.

But strings were attached. According to several international NGOs which produced the report Crude Designs, Iraq would suffer losses of more than $74 billion because for forty years, Baghdad would be prevented from controlling the country’s oil sector, responsible for 90% of Iraq’s GDP. When the Iraqi puppet government followed IMF dictates and raised petrol and diesel prices by up to 200%, riots ensued and the oil minister was compelled to resign in protest. Five Iraqi trade unions criticised IMF and World Bank policies and demanded:

* complete sovereignty for Iraq over its petroleum and natural resources;
* increased transparency and additional representation for Iraq in the decision-making structures of IFIs;
* cancellation of debt incurred by the former regime and an end to conditionality;
* rejection of the privatisation of publicly owned entities; and
* rejection of the increase in the price of petroleum products. [29]

What can we conclude about the dire state of international financial governance under Wolfowitz’s leadership? Quite conclusively, reform had gone into reverse. This was again demonstrated in September 2006 at the World Bank/IMF annual meeting in Singapore, when African voting shares declined so that those of China, Argentina, Mexico and Turkey could rise slightly. Norway is justified in following its Soria Moria pledge to move money out of the Bank, and should do so immediately as a signal that Wolfowitz’s ongoing corrupt, bullying approach has a cost.

8. Conclusion: A new model or relegitimisation of the old ?

Indeed, while the present centre-left government is far preferable to its predecessor, Norway has not yet done nearly enough to make good on the promises of Soria Moria. This is especially true in terms of illegitimate debt and making the funding ‘switch from the World Bank to development programmes and emergency aid measures’. Oslo’s ongoing collaboration with the Bank in many settings sets back the cause of social justice, by continuing to provide legitimacy to one of the world’s most undemocratic and economically-regressive institutions.

Norway’s role in Malawi, Mozambique, Tanzania and Uganda is mediated through the Bank’s Poverty Reduction Support Credit system, which means foreign aid is channelled by the conservative African finance ministries and central banks - whose political leaders and top staff are invariably graduates of the Bank and IMF - back to the Bank and IMF in debt repayments. If Norway were serious about cancelling African debt and ensuring that aid is well used, such payments would be halted and governments would be encouraged - as even Jeffrey Sachs has (unsuccessfully) advised - to move resources instead to the health and education budgets.

To illustrate on a more personal note, the hosting of Wolfowitz at the October 2006 Extractive Industries Transparency Initiative (EITI) by Minister of Foreign Affairs Jonas Gahr Store gave the Bank president a platform to pretend to fight corruption, with no questions asked about his role - and the Bank’s - in the destruction of Iraq. Norwegian civil society organisations such as Slug and Attac held a demonstration, but Store and Solheim were notably gracious to Wolfowitz and others involved in criminal oil/minerals activities. With Norway as the secretariat and host government in coming years, the EITI will probably continue to invite and even celebrate the roles of corrupt, repressive and neoliberal governments, such as Nigeria’s. A more genuine social democratic government - such as Norway’s in prior decades - would offer liberation solidarity to oppressed civil society and liberation forces, such as the Nigerian Delta women who regularly fight the government and oil companies.

If Norway professes to be a force for global social democracy, is it appropriate to continue funding the World Bank, working with the Bank to control poor African countries, demanding loan repayments from wretched Third World debtors, and giving a platform and legitimacy to unreformed institutions whose leaders’ ideas are based upon free-market logic? One such guest of Store and Solheim at a December 2006 event had argued as follows:

I believe that ‘government’, as we know it today, should pull out of most things except for law enforcement and justice, national defense and foreign policy, and let the private sector, a ‘Grameenized private sector’, a social-consciousness-driven private sector, take over their other functions. [30]

These lunatic, neoliberal words were written by Muhammed Yunus in his autobiography. Yunus was hosted by the Norwegian government as Nobel Peace Prize winner in December 2006. The fact that Telenor was making vast profits from its majority holding in GrameenPhone, with its 60% Bangladeshi cellphone market share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. , may or may not have had something to do with the prize. But the Nobel committee’s sloppiness is reflected in their failure to address the deeper problems in trying to make capitalism work through marginal reforms in the Third World. Apparently unnoticed by the committee, when the Wall Street Journal profiled Yunus on its front page five years earlier, it started in a celebratory manner: ‘To many, Grameen proves that capitalism can work for the poor as well as the rich,’ having ‘helped inspire an estimated 7,000 so-called microlenders with 25 million poor clients worldwide’. [31] Yet looking more closely, the Journal’s reporters conceded the prevalence of Enron-style accounting. A fifth of the bank’s loans in late 2001 were more than a year past-due: ‘Grameen would be showing steep losses if the bank followed the accounting practices recommended by institutions that help finance microlenders through low-interest loans and private investments.’ According to the Journal, a typical Grameen gimmick was to reschedule short-term loans that were unpaid after as long as two years, instead of writing them off, letting borrowers accumulate interest through new loans simply to keep alive the fiction of repayments on the old loans. Not even extreme pressure techniques - such as removing tin roofs from delinquent women’s houses, according to the Journal report - improved repayment rates in the most crucial areas, where Grameen had earlier won its global reputation amongst neoliberals who consider credit and entrepreneurship as central prerequisites for development.

Giving the Nobel Peace Prize to someone whose industry - banking, even for poor people - contributes to conflict-generation is a metaphor for Norway’s current dilemma: how to put a human face on global capitalism, especially in its most brutal and self-destructive phase in recent history. The global balance of forces is adverse for social and environmental improvement, to be sure. But governments like those in Venezuela, Bolivia, Ecuador and Cuba have been challenging global/local injustice, along with millions of social movement activists in the World Social Forum and many other civil society groups across the world, including Africa. For the Norwegian government, the time has come to decide whether resources and legitimacy will continue to be given to those, like Wolfowitz, who will set back progress - or instead to those who will advance it.

Patrick Bond Bond A bond is a stake in a debt issued by a company or governmental body. The holder of the bond, the creditor, is entitled to interest and reimbursement of the principal. If the company is listed, the holder can also sell the bond on a stock-exchange.  [32] an essay for the Norwegian Council for Africa December 2006


[2Eric Toussaint and Damien Millet (2005), ‘Multilateral Institutions Taken Hostage’, Le Soir, 15 April.

[3Deen, T. (2005), ‘ UN Faces New Political Threats From US’, Inter Press Service,, 23 November.

[4Hooper, J. and E.Pilkington (2006), ‘UN to appoint former Moonie as head of World Food Programme’, The Guardian, 6 November.

[5Jubilee South (2001), ‘Pan African Declaration on PRSPs,’ Kampala, 12 May.

[6Toussaint, E. (2004), Your Money or Your Life, Chicago, Haymarket Books, p.150.

[7Toussaint, Your Money or Your Life, p.384. See also

[8International Monetary Fund (2005), Regional Economic Outlook: Sub-Saharan Africa, Washington, September, p.27. Note that the figures do not include commercial debt.

[9GreenLeft Weekly (2005), ‘Africa needs Justice not Charity’, 29 June.

[10Ambrose, S. (2005), ‘Assessing the G8 Debt Proposal and its Implications’, Focus on Trade, 25 September 2005.

[11Jones, J. (2006), Personal Communication.

[13Martinez-Alier, J. (2003), ‘Marxism, Social Metabolism and Ecologically Unequal Exchange’, Paper presented at Lund University Conference on World Systems Theory and the Environment, 19-22 September. See also

[15McGown, J. (2006), ‘Out of Africa: Mysteries of Access and Benefit Sharing’, Edmonds Washington, the Edmonds Institute and Johannesburg, the African Centre for Biosafety.

[16Martinez-Alier cites Parikh, J.K. (1995), ‘Joint Implementation and the North and South Cooperation for Climate Change, International Environmental Affairs, 7, 1.

[17Moskwa, W. (2006), ‘Norway Presses International Lenders on Conditions,’ Reuters, 28 November.

[18Two analyses from within the Bank which do not question the merits of neoliberal conditions, just their effectiveness, are World Bank (2005), ‘Review of World Bank Conditionality’, Washington, September, ; and World Bank (2006), ‘Development Policy Lending Retrospective,’ Washington, July,

[19Eurodad (2006), ‘World Bank and IMF Conditionality: A Development Injustice,’ Brussels, June,; ActionAid (2006), ‘A Shadow Review of World Bank Conditionality,’ London, September,; and Christian Aid (2005), ‘Challenging Conditions: A New Strategy for Reform at the World Bank and IMF,’ London, July,

[20‘CSO Common Statement on the Norwegian Conference on Conditionality’, Oslo, November 2006.

[21Bull, B., A.Jerve and E.Sigvaldsen (2006), ‘The World Bank’s and the IMF’s use of Conditionality to Encourage Privatization and Liberalization: Current Issues and Practices’, Report prepared for the Norwegian Ministry of Foreign Affairs as a background for the Oslo Conditionality Conference, November 2006.

[22Vallette, J. (2005), ‘The Wolfowitz Chronology’, Institute for Policy Studies Sustainable Energy and Economy Network, URL:, March.

[23US Defense Department (1992), ‘Defence Planning Guidance Memo’, Washington.

[24The Guardian, 4 June 2003.

[25Cited in Westphal, D. (2005), ‘Behind Iraq Prewar Debate’, Sacramento Bee, 27 November.

[26Huffington, A. (2005), ‘When Did the World Bank Become the Home for Wayward Architects of War?’, The Huffington Post, 29 November.

[27Harkavy, W. (2006), ‘Wolfie at the Door: Preaching against Corruption at World Bank, he Practices it - and Staff Rebels’,, 24 January.

[28Anonymous (2005), ‘Wolfowitz at the World Bank: A New Leaf?’, MRzine, 25 August. See also Weitzman, H. (2005), ‘Ecuador Finance Minister Quits over Loan Dispute’, Financial Times, 6 August. Next door to Ecuador, in Colombia, Wolfowitz had helped Occidental defend one of the most productive oil fields in the world, Cano Limon, whose pipeline runs through jungle adjacent to guerrilla controlled territory. The US Defence Department established a Colombian ‘Pipeline Brigade’ with a $150 million grant arranged by Wolfowitz when he was the second-ranking Pentagon official.

[30Yunus, M. (1998), Banker to the Poor: The Autobiography of Muhammad Yunus, Dhaka, University Press of Bangladesh, p.214. For more on Yunus, see Bond, P. (2007), ‘Microcredit Evangelism, Health and Social Policy’, International Journal of Health Services, 37, 1.

[31Pearl, D. and M. Phillips (2001), ‘Small Change: Bank that Pioneered Loans for the Poor hits Repayment Snag,’ Wall Street Journal, 27 November.

[32Professor of Development Studies and Director of the Centre for Civil Society at the University of KwaZulu-Natal, Durban, South Africa. For more on these themes, see Bond, P. (2006), Looting Africa, London, Zed Books and Pietermaritzburg, University of KwaZulu-Natal Press; and Bond, P. (2006), Talk Left, Walk Right, Pietermaritzburg, University of KwaZulu-Natal Press and Trenton, Africa World Press.

Patrick Bond

is professor at the University of Johannesburg Department of Sociology, and co-editor of BRICS and Resistance in Africa (published by Zed Books, 2019).



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