Committee for the Abolition of Illegitimate Debt

You wrote in a recent article: “The coronavirus was the spark or trigger of the stockmarket crisis, not its cause.” Can you be more specific?

While governments and mainstream media keep claiming that the stockmarket crisis is a consequence of the coronavirus pandemic, I pointed out that all the ingredients for another financial crisis had been present for several years and that the coronavirus was merely the spark or trigger of the stockmarket crisis, not its cause (No, the coronavirus is not responsible for the fall of stock prices) . The amount of volatile stuff in the financial sphere had long reached saturation point and we knew that a spark could lead to a huge blow-up. We did not know when or how it would happen, but we knew it could happen.

The first major stockmarket shock occurred in December 2018 on Wall Street. Under pressure from a handful of large private banks and the Donald Trump Administration, the U.S. Federal Reserve FED
Federal Reserve Officially, Federal Reserve System, is the United States’ central bank created in 1913 by the ’Federal Reserve Act’, also called the ’Owen-Glass Act’, after a series of banking crises, particularly the ’Bank Panic’ of 1907.

FED – decentralized central bank : http://www.federalreserve.gov/ (the Fed) resumed its rate cuts. A new frenzy of rising 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. prices flared up and big corporations went on buying back their own shares so as to amplify the process See (To confront capitalism’s multifaceted crisis the bankers must be expropriated and the banks socialised) . Large private companies raised their debt levels and major investment funds Investment fund
Investment funds Private equity investment funds (sometimes called ’mutual funds’ seek to invest in companies according to certain criteria; of which they most often are specialized: capital-risk, capital development funds, leveraged buy-out (LBO), which reflect the different levels of the company’s maturity. contracted loans to buy companies of all kinds, including in the manufacturing industry.

Next, again on Wall Street, from September to December 2019, there was a major crisis due to a shortage of liquidities Liquidities The capital an economy or company has available at a given point in time. A lack of liquidities can force a company into liquidation and an economy into recession. . The Fed made a massive intervention, injecting hundreds of billions dollars to prevent markets from collapsing (The Credit Crunch is Back and the Federal Reserve Panics on an Ocean of Debt). The European Central Bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

ECB : http://www.bankofengland.co.uk/Pages/home.aspx (ECB ECB
European Central Bank The European Central Bank is a European institution based in Frankfurt, founded in 1998, to which the countries of the Eurozone have transferred their monetary powers. Its official role is to ensure price stability by combating inflation within that Zone. Its three decision-making organs (the Executive Board, the Governing Council and the General Council) are composed of governors of the central banks of the member states and/or recognized specialists. According to its statutes, it is politically ‘independent’ but it is directly influenced by the world of finance.

https://www.ecb.europa.eu/ecb/html/index.en.html ) and other major central banks (UK, Japan, China, etc.) implemented more or less the same kind of policy and they now bear a huge responsibility for the accumulation of volatile elements in the financial sphere.

Of course the scale of the decline in production in the months following March 2020 will be unprecedented compared to the crises of the last 70 years. It will be crushing. But the production crisis had already started on a large scale in 2019, notably in the car industry with a massive fall of sales in China, India, Germany, the UK and other countries. Overproduction also affected the equipment and machine tool manufacturing sector in Germany, one of the world’s leading producers in the field. Chinese industrial growth experienced a serious slow-down, which had serious consequences for countries that exported to China, whether equipment, cars or raw materials. During the second semester of 2019, a recession started in the manufacturing industry in Germany, Italy, Japan, South Africa, Argentina, and in several industries in the USA.

The coronavirus pandemic was the trigger. Any other serious occurrence might have led to the same effect, such as an open ‘hot’ war between the USA and Iran or a US military intervention in Venezuela. The stockmarket crisis would then have been presented as a consequence of the war. There too, I would have claimed that the war, though obviously with horrific consequences, would have been the spark not the underlying cause. So even though there is an undeniable link between the stockmarket crisis and the coronavirus pandemic, it does not mean that we should not call the lie of simplistic and manipulative explanations that blame the coronavirus.

What does the Coronavirus crisis tell us about the European Union, the way it functions and the relations among member-states?

The European Union and its institutions are not prepared to face the coronavirus pandemic: the president of the European Council does not even have a team of ten physicians to send to Italy or Spain. On the other hand, the EU spends €420 million on Frontex, its over-equipped border police. The EU does not have field hospitals or spare ventilators or face masks to help out a member state. On the other hand it can rely on European drones to spy on people desperately seeking asylum. And those people die by their thousands in the Mediterranean every year. Fortunately Cuba sent 50 internationalist physicians to help the people of Italy. We have to revive internationalism among peoples.

You are particularly concerned about the situation in the “Third World”. Which areas are going to be the most badly hit? The oil-producing countries? The highly indebted countries?

All people in the “Global South” are victims of the multidimentional crisis of the global capitalist system. The coronavirus pandemic is an extremely serious public health issue and the human suffering caused by the spread of the virus is huge. It has started to hit massively the countries of the Global South where the public health systems have been undermined by forty years of neoliberal policies, resulting in a predictably heavy death toll. Using the pretext of fiscal austerity to repay their public debt, governments and major multilateral institutions such as 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.

(WB) 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.

http://imf.org (IMF) imposed policies that resulted in deteriorated public health systems everywhere.

Countries of the Global South are facing a new debt crisis, their export revenues are falling because the prices of raw materials are plummeting while the amount of debt to be paid back is enormous. If they want to deal with the Covid19 pandemic, they must suspend payments of their public debt and use the money for their public health services.

What should we do?

We must fight to implement a wide anticapitalist program that includes a series of basic measures such as suspending public debt repayments followed by the cancellation of illegitimate debt, whether public or private; expropriating the major shareholders of banks without compensation so as to create a genuine public service for savings, credit and insurance under citizen monitoring; closing the stockmarkets; setting up a genuine free national health service; expropriating without compensation big pharmaceutical companies and private research laboratories and turning them into public services under citizen monitoring; expropriating without compensation companies in the energy sector (to enable the planification of efforts to counter the environmental crisis) and several other radical measures including emergency measures to immediately improve the living standards of the majority of the people. We must abrogate free trade agreements and re-localize production as much as possible, prioritizing short circuit production.

The necessary response to the coronavirus pandemic must be an opportunity to reach out towards a genuine revolution to radically change society – its way of life, mode of ownership and mode of production. This revolution will only occur if the victims of the system start self-organizing to eject the 1% and their lackeys from the various centres of power to create real democratic power. A self-managing, feminist, ecological-socialist revolution is required.

Translated by Vicki Briault and Christine Pagnoulle, CADTM

Arabic version https://bit.ly/2UFXEtz