President Lula’s “realpolitik” and the “alterglobalisation” movement

13 January by Eric Toussaint , Frédéric Lévêque


G8 Counter Summit in Evian, 2003 (CC - Wikimedia)

An interview with Eric Toussaint of the CADTM (Committee for the Abolition of the Third World Debt) by Frédéric Lévêque, in Geneva, in the context of the “Illegal G8” counter-summit, following his meeting on 2 June 2003 with President Lula of Brazil

Context: On the occasion of the annual summit 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 (United States, Japan, Germany, UK, France, Italy, Canada, Russia) in the French town of Evian on 1 and 2 June 2003, several heads of state outside the G8 group were invited to attend by the French president, Jacques Chirac, who was keen to demonstrate to international public opinion that, through this invitation to the non-member states, the G8, and France in particular, was seeking dialogue with the rest of the world. Amongst those who attended were President Lula of Brazil and the heads of state or government of China, India, Nigeria, Senegal, South Africa, Egypt and Mexico. This invitation was essentially intended to further legitimise the G8, the informal club of the world’s main powers, at a time when its credibility rating was at an all-time low.

President Chirac’s guests met in Evian before the official start of the G8 meeting, at the same time as over 100,000 people were filling the streets of Geneva (Switzerland) and Annemasse (France) demonstrating against this illegal G8. The main topics included the cancellation of the Third World debt, the rejection of militarism, the battle against the WTO 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.

, solidarity with the Palestinian people, access to generic medicines… and a refusal of the neo-liberal reform of the French pension and education systems which was bringing millions of workers out onto the streets of France.


Fred Lévêque: Yesterday, with others, you were able to meet one of the heads of state specially invited to the G8, President Lula of Brazil. Could you explain for us the purpose of the meeting and, at the same time, the policies being pursued by President Lula?

Eric Toussaint: Luis Inacio Lula Da Silva was elected President in October 2002 with an overwhelming majority of votes over 65%; he was interested in meeting representatives of the “alterglobalisation” movement in Europe. Four of us, representatives of these movements, attended this meeting: Jacques Nikonoff, President of ATTAC-France, Rafaella Bolini, of the Italian Social Forum, Helena Tagesson (Sweden) from the campaign against the WTO, and myself from the CADTM. The meeting took place in Geneva at the Brazilian ambassador’s residence.
Before going to the meeting we had decided to make clear that we could not act on behalf of the movement and that we had been given no mandate to represent others. We could speak only for ourselves, and had no intention of being coaxed into a press conference, for example, offering the Brazilian president opportunities to associate us with the policies he was conducting. We would have done the same with any other president, but in this case we were faced with the fact that, within months of having taken up office, Lula’s policies were in obvious contradiction with the expectations of the range of social movements with which we were working.


Fred Lévêque: How did the meeting turn out?

Eric Toussaint: Understandably, given the policies I’ve just outlined, we felt as if we were walking on eggshells, and were anxious not to find ourselves being trapped or instrumentalised. We decided, in an agreement on the organisation of the meeting, that each of us (the four delegates) would take five minutes to present the main demands of our movements for alternatives to the current globalisation process, which directly concern Brazil. As for the meeting itself… we were received by President Lula, in the company of his labour minister and the minister for foreign relations, as well as several members of parliament and two of his closest counsellors. President Lula spent half an hour outlining his government’s policy; he defended the austerity measures adopted (the increase in 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.
, budget slashed by over three billion dollars – 14 billion reals) on the grounds that they were necessary to stabilise the very difficult economic situation. He announced his intention of making good, as of now (whilst admitting that the process would be long) the commitments he had made to the population during his election campaign.

We for our part made the following points: Jacques Nikonoff, President of ATTAC-France, expressed the clear opposition of his organisation to private pension funds Pension Fund
Pension Funds
Pension funds: investment funds that manage capitalized retirement schemes, they are funded by the employees of one or several companies paying-into the scheme which, often, is also partially funded by the employers. The objective is to pay the pensions of the employees that take part in the scheme. They manage very big amounts of money that are usually invested on the stock markets or financial markets.
, and its concern at the current Brazilian government’s promotion of these. Secondly, he reiterated ATTAC’s ardent desire to see Brazil declaring its support for the introduction of the Tobin tax Tobin Tax A tax on exchange transactions (all transactions involving conversion of currency), originally proposed in 1972 by the US economist, James Tobin, as a means of stabilizing the international financial system. The idea was taken up by the association[ATTAC and other movements for an alternative globalization, including the CADTM. Their aim is to reduce financial speculation (which was of the order of 1,500 billion dollars a day in 2002) and redistribute the money raised by this tax to those who need it most. International speculators who spend their time changing dollars for yens, then for euros, then dollars again, etc., as they calculate which currency will appreciate and which depreciate, will have to pay a small tax, somewhere between 0.1% and 1%, on each transaction. According to ATTAC, this could raise 100 billion dollars on a global scale. Considered unrealistic by the ruling classes to justify their refusal to adopt it, the meticulous analyses of globalized finance carried out by ATTAC and others has, on the contrary, demonstrated how simple and appropriate such a tax would be.

ATTAC : https://www.attac.org/
. It should be noted that Lula came to the G8 with a proposal for a tax on the sale of arms, the revenue from which could be used to finance a global drive against hunger. In a press conference Chirac had remarked that Lula’s proposal seemed to present a greater 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. than the Tobin tax, thus taking the opportunity to attack the tax. These were the two main topics raised by Jacques Nikonoff.

For my part, I pointed out the CADTM’s concern that Latin America was now faced, as in the eighties, with an enormous outflow of resources, and that these were leaving the region in favour of creditors in the North. Negative net transfers on debt Net transfers on debt This refers to the subtraction of debt-servicing (yearly payments - interest + capital sum - to the industrialised countries) from the year’s gross payments (donations and new loans) made by the creditors.

The net transfer on debt is said to be positive when the country or continent concerned receives more (in loans) than it repays. It is negative if the sums repaid are greater than the sums lent to the country or continent concerned.
came to more than 200 billion dollars between 1996 and 2002, the equivalent of two Marshall plans. Brazil alone lost more than 70 billion dollars in net negative transfers on debt between 1997 and 2001, 27 billion of which had come directly from the public coffers. The creditors in question were essentially private banks, the financial markets, 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
and 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.

. I insisted on the fact that Brazil should not wait for a payment crisis, or the point of default, before taking defensive action. Before, that is, carrying out an audit on the origins and exact composition of Brazil’s external debt with a view to defining what is legitimate and what illegitimate - as provided for, in fact, by Brazil’s 1988 national Constitution. In 2000, during a referendum organised by the Landless Movement (MST), the Unitarian Confederation of Workers (CUT), Brazil’s Jubilee South Campaign and the National Conference of Bishops (with the support of the Workers’ Party the PT), over 90% of the 6 million Brazilians voting declared themselves to be in favour of a suspension of debt payments for the duration of the audit period. The PT parliamentarians proposed a bill to this effect. No president has ever taken the step. I said to Lula: “There is now a real opportunity, since you have the power in your hands, to launch an initiative and create the conditions for a suspension of payments; the funds destined to service the debt could be diverted towards social capital, development projects, etc.". I then suggested that Brazil appeal to the other Latin-American countries to join in a coalition of indebted countries for non-payment of the debt.

Helena Tagesson, the third speaker of our group, from Sweden, raised the need for action at the Cancun summit in September 2003 to block the WTO agreements made at Doha in November 2001. The meeting should be paralysed in the same way as at Seattle in late November/early December 1999, when, through our mobilisation and the contradictions between the United States and Europe, we succeeded in blocking an even stronger trade liberalisation offensive. In 2001 the WTO took revenge. It succeeded in setting a highly neo-liberal agenda with the General Agreement on Trade in Services, which is to be finally defined and decided at Cancun. She therefore insisted on the fact that we have four months left to try to paralyse Cancun. She proposed that Brazil, in concert with other Third World countries, work to this end, also paying special attention to the question of water privatisation being pursued by the WTO. Brazil could provide experimental models, as in Porto Alegre for example, on the exploitation and distribution of water experiments that would be lost forever if the Doha agenda was approved at Cancun.

The fourth of our group was Rafaella Bolini of the Italian Social Forum. She is one of the leaders of the anti-war movement, and the Italians were extremely active in the campaign against the war in Iraq. She asked Brazil to call for a meeting of a UN General Assembly, to obtain a vote condemning the occupation of Iraq by the United States and their allies. The UN Security Council had in fact voted a resolution on 22 May legitimising the military occupation of Iraq by the United States, the UK and Australia. We have of course no confidence in the Security Council. However, without fostering too many illusions, a majority against the occupation of Iraq might be possible, if there were really to be a debate at the General Assembly, and if the member states had a genuine vote. This was achieved on several occasions in the seventies and eighties. Israel was condemned several times, despite United States opposition, as the United States were in a minority.

Lula’s response to this was that there is a great difference between what is desirable and what is feasible. All our proposals in other words were very interesting, but he saw no way of putting them into action. He stood by his policy on private pension funds. He made no commitment on the debt issue. On the question of trade he said that he did indeed wish to curb deregulation and limit the scope of the General Agreement on Trade in Services. Concerning Iraq, he said that as a country he had taken a clear stand against the war in Iraq. But he went no further, and he did not offer to take any initiative with the UN Assembly.

That is a concise summary of our meeting. I can only conclude that the huge expectations, not only of the majority of Brazilians, but of others in Latin-America and the world, of a progressive government orienting its policies away from neo-liberalism, are clearly heading for a major disappointment. And we might as well be clear about it from the start if not, the more we continue to entertain illusions about the real direction of the Lula government, the harder we will fall. Somehow, what comes out of the last few months in Latin America, is that people have voted clearly in several countries for leftist programmes. I’m thinking of Evo Morales in Bolivia, who made great electoral progress although not achieving the presidency... or Lucio Gutiérrez in Ecuador, who, backed by the indigenous people’s movement PachaKutik and the CONAIE, was elected on a progressive programme... and Lula... In the last two cases, Lula and Gutiérrez were elected president but lost no time in making concessions to the financial markets and ensuring the continuity of the neo-liberal programme of the predecessors they had condemned in their election campaigns. And it’s even worse with Gutiérrez he has turned out to be Bush’s best friend in the region and claims to be a great friend of the Colombian president, and has distinctly kept his distance from President Chavez of Venezuela.

There is a very clear message here for the social movements: they must retain their independence from their governments. The fact that a party comes to power on, in principle, the programme of the social movements does not mean that these movements should reduce their expectations, abandon their radicalism, and sit back saying “No need to throw a spanner in the works for our friends in the government”. On the contrary, we must increase the pressure on these governments, to ensure that they act in line with the promises that brought them to power.



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 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 (see here), 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.

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