Committee for the Abolition of Illegitimate Debt

Walden Bello is director of the NGO Focus on the Global South. This organisation is partner of the CADTM international network.

In 1995, the World Trade Organization was born. The offspring of eight years of negotiations, the World Trade Organization (WTO WTO
World Trade Organisation The WTO, founded on 1^st 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.

) was hailed in the establishment press as the gem of global economic governance in the era of globalization. The nearly 20 trade agreements that underpinned the WTO were presented as a set of multilateral rules that would subject both the powerful and the weak to a common set of rules backed by an effective enforcement apparatus In the WTO, it was claimed, the powerful United States and lowly Rwanda had exactly the same number of votes: one.

The Crisis of the Globalist Project

Now the triumphalism of those earlier years is gone. As the fifth Ministerial of the WTO approaches, the organization is in gridlock. A new agreement on agriculture is nowhere in sight as the United States and the European Union stoutly defend their multibillion dollar subsidies. Brussels is on the verge of imposing sanctions on Washington for maintaining tax breaks for exporters who have been found to be in violation of WTO rules. Meanwhile, Washington has threatened to file a case with the WTO against the European Union’s (EU) moratorium on genetically modified foods. Developing countries, some once hopeful that the WTO would in fact bring more equity Equity The capital put into an enterprise by the shareholders. Not to be confused with ’hard capital’ or ’unsecured debt’. to global trade, unanimously agree that most of what they have reaped from WTO membership are costs, not benefits. Instead of heralding a new round of global trade liberalization, the Cancun ministerial is likely to announce a stalemate.

What happened? In a word, Empire. It turns out that globalization and U.S. unilteralism don’t mix. But first, some notes on globalization and the globalist project.

Globalization is the accelerated integration of capital, production, and markets globally, a process driven by the logic of corporate profitability. It is defined by the ideological hegemony of neoliberalism, which focuses on “liberating the market” through privatization, deregulation, and trade liberalization. There were, broadly, two versions of neoliberal ideology-a “hard” Thatcher-Reagan version and a “soft” Blair-Soros version (globalization with “safety nets”). But underlying both approaches was the unleashing of market forces, and the removing or eroding of constraints imposed upon transnational firms by labor, the state, and society.

Three Moments of the Crisis of Globalization

There have been three moments in the deepening crisis of the globalist project.

The first was the Asian financial crisis of 1997. This event, which laid low the proud “tigers” of East Asia, revealed that one of the key tenets of globalization-the liberalization of the capital account to promote freer flows of capital, especially finance or speculative capital, could be profoundly destabilizing. This was clearly shown when, in just a few weeks’ time, one million people in Thailand and 21 million in Indonesia were pushed below the poverty line. [1]

The Asian financial crisis was the “Stalingrad” of 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), the prime global agent of liberalized capital flows. Its record in the ambitious enterprise of subjecting some 100 developing economies to “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/ ” was found sorely wanting. Structural adjustment programs were designed to accelerate deregulation, trade liberalization and privatization. Almost everywhere, however, they resulted in economic stagnation, and increased poverty and inequality.

Shortly after the Asian financial crisis, key intellectual defenders of the neoclassical free market model began leaving the fold-among them Jeffrey Sachs, noted earlier for his advocacy of “free market” shock treatment in Eastern Europe in the early 1990’s; Joseph Stiglitz, former chief economist of 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.

; Columbia Professor Jagdish Bhagwati, who called for global controls on capital flows; and financier George Soros, who condemned the lack of controls in the global financial system that had enriched him.

The second moment of the crisis of the globalist project was the collapse of the third ministerial of the WTO in Seattle in December 1999. Seattle was the fatal intersection of three streams of discontent and conflict that had been building for sometime:

Developing countries resented the inequities of the Uruguay Round agreements that they felt compelled to sign in 1995.
Massive popular opposition to the WTO emerged globally from myriad sectors of global civil society, including farmers, fisher folk, labor unionists, and environmentalists. By posing a threat to the well-being of each sector in many of its agreements, the WTO managed to unite global civil society against it.

There were unresolved trade conflicts between the EU and the United States, especially in agriculture, which had been simply been papered over by the Uruguay Round agreement.

These three volatile elements combined to create the explosion in Seattle. The developing countries rebelled against the Northern diktat at the Seattle Convention Center; 50,000 people massed militantly in the streets; and the differences prevented the EU and the United States from acting in concert to salvage the ministerial. In a moment of lucidity right after the Seattle debacle, British Secretary of State Stephen Byers captured the essence of the crisis: “[T]he WTO will not be able to continue in its present form. There has to be fundamental and radical change in order for it to meet the needs and aspirations of all 134 of its members.” [2]

The third moment of the crisis was the collapse of the stock market and the end of the Clinton boom. This was not just the bursting of the bubble but a rude reassertion of the classical capitalist crisis of overproduction, the main manifestation of which was massive overcapacity. Prior to the crash, corporate profits in the United States had not grown since 1997. The crash was related to overcapacity in the industrial sector, the most glaring example being in the troubled telecommunications sector, where only 2.5 percent of installed capacity globally was being utilized. This stagnation of the real economy led to capital being shifted to the financial sector, resulting in the dizzying rise in 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. values. But since profitability in the financial sector cannot deviate too far from the profitability of the real economy, a collapse of stock values was inevitable. This occurred in March 2001, leading to prolonged stagnation and the onset of deflation.

The New Economics of George W. Bush

The crisis of globalization, neoliberalism, and overproduction provides the context for understanding the economic policies of the Bush administration, notably its unilateralist thrust. The globalist corporate project expressed the common interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. of the global capitalist elites in expanding the world economy and their fundamental dependence on one another. However, it did not eliminate competition among the national elites. In fact, the ruling elites of the United States and Europe had factions that were more nationalist in character as well as more tied for their survival and prosperity to the state, such as the military-industrial complex in the United States. Indeed, since the eighties, there has been a sharp struggle between a section of the ruling elite stressing the common interest of a global capitalist class, and the more nationalist faction that wanted to ensure the supremacy of U.S. corporate interests.

As Robert Brenner has pointed out, the policies of Bill Clinton and his treasury secretary Robert Rubin put prime emphasis on the expansion of the world economy as the basis of the prosperity of the global capitalist class. For instance, in the mid-1990’s, they pushed a strong dollar policy to stimulate the recovery of the Japanese and German economies, so that they could serve as markets for US goods and services. The earlier, more nationalist Reagan administration, on the other hand, had employed a weak dollar policy to regain competitiveness for the U.S. economy at the expense of the Japanese and German economies. [3] With the George W. Bush administration, we are back to the weak dollar and other economic policies that are meant to revive the U.S. economy at the expense of the other center economies. Several features of this approach are worth stressing:

 Bush’s political economy is very wary of a process of globalization that is not managed by a U.S. state, to ensure that the process does not diffuse the economic power of the United States. Allowing the market solely to drive globalization could result in key U.S. corporations becoming the victims of globalization. Thus, despite the free market rhetoric, we have a group that is very protectionist when it comes to trade, investment, and the management of government contracts. It seems that the motto of the Bushites is protectionism for the United States and free trade for the rest.

 The Bush administration is wary of multilateralism as a way of global economic governance since while multilateralism may promote the interests of the global capitalist class in general, it may often contradict particular U.S. corporate interests. The Bush coterie’s growing ambivalence towards the WTO stems from the fact that the United States has lost a number of rulings there, rulings that may hurt U.S. capital but serve the interests of global capitalism as a whole.

 For the Bush people, strategic power is the ultimate modality of power. Economic power is a means to achieve strategic power. This is related to the fact that under Bush, the dominant faction of the ruling elite is the military-industrial establishment that won the Cold War. The conflict between globalists and unilateralists (or nationalists) along this axis is shown in the approach toward China. The globalist approach puts the emphasis on engagement with China, seeing its importance primarily as an investment area and market for U.S. capital. The nationalists, on the other hand, see China mainly as a strategic enemy, and they would rather contain it rather than assist its growth.

If these are seen as the premises for action, then the following prominent elements of recent U.S. economic policy make sense:

 Achieving control over Middle East oil. While it did not exhaust the war aims of the administration in invading Iraq, it was certainly high on the list. With competition with Europe becoming the prime aspect of the trans-Atlantic relationship, this was clearly aimed partly at Europe. But perhaps the more strategic goal was to preempt the region’s resources in order to control access to them by energy poor China, which is seen as the United States’s strategic enemy. [4]

 Aggressive protectionism in trade and investment matters. The US has piled up one protectionist act after another. One of the most brazen is its stymieing of WTO negotiations over vital matters of public health. On behalf of the powerful pharmaceutical lobby Lobby
Lobbies A lobby is an entity organized to represent and defend the interests of a specific group by exerting pressure or influence on persons or institutions that hold power. Lobbying consists in conducting actions aimed at influencing, directly or indirectly, the drafting, application or interpretation of legislative measures, standards, regulations and more generally any intervention or decision by the Public Authorities. , it staunchly resists the loosening of patent rights to drugs on all but three diseases. While it seems perfectly willing to see the WTO negotiations unravel, Washington has put most of its efforts into signing up countries to bilateral or multilateral trade deals such as the Free Trade Agreement of the Americas (FTAA) before the EU gets them into similar deals. Indeed the term “free trade agreements” is a misnomer since these are actually preferential trade deals.

 Incorporating strategic considerations into trade agreements. In a recent speech, U.S. Trade Representative Robert Zoellick stated explicitly that “countries that seek free trade agreements with the United States must pass muster on more than trade and economic criteria in order to be eligible. At a minimum, these countries must cooperate with the United States on its foreign policy and national security goals, as part of 13 criteria that will guide the U.S. selection of potential FTAA partners.” New Zealand, perhaps one of the governments most committed to free trade, has nevertheless not been offered a free trade deal because it has a policy that prevents nuclear ship visits, which the U.S. government feels is directed at the United States. [5]

 Manipulation of the dollar’s value to force rival industrial economies to shoulder costs, thereby regaining competitiveness for the US economy. While the Bush administration has denied that this is a beggar-thy-neighbor policy, the U.S. business press has seen it for what it is: an effort to revive the U.S. economy at the expense of the European Union and other center economies.

 Aggressive manipulation of multilateral agencies to push the interests of U.S. capital. While this might not be too easy to achieve in the WTO owing to the weight of the European Union, it can be more readily done at the World Bank and the IMF, where U.S. dominance is more effectively institutionalized. For instance, the IMF management proposed a Sovereign Debt Sovereign debt Government debts or debts guaranteed by the government. Restructuring Mechanism (SDRM) which would enable developing countries to restructure their debt, while giving them some protection from creditors. Already a very weak mechanism, the SDRM was vetoed by the U.S. Treasury in the interest of U.S. banks, though it had the support of many European governments. [6]

The Economics and Politics of Overextension

Any discussion of the likely outcomes of the Bush administration’s economic policies must take into account both the state of the U.S. economy and the global economy, and the broader strategic picture. A key basis for successful imperial management is an expanding national and global economy-something precluded by the extended period of deflation and stagnation ahead, which is more likely to spur inter-capitalist rivalries. For, without legitimacy, imperial management is inherently unstable.

The Roman Empire, for example, solved its problem of legitimacy through political, not military, means. It extended Roman citizenship to ruling groups and non-slave peoples throughout the empire. Political citizenship combined with a vision of the empire providing peace and prosperity for all created that intangible but essential moral element called legitimacy.

Needless to say, extension of citizenship plays no role in the U.S. imperial order. In fact, U.S. citizenship is jealously reserved for a very tiny minority of the world’s population, entry into whose territory is tightly controlled. Subordinate populations are not to be integrated but kept in check either by force or the threat of the use of force or by a system of global or regional rules and institutions-the World Trade Organization, the Bretton Woods system, NATO NATO
North Atlantic Treaty Organization NATO ensures US military protection for the Europeans in case of aggression, but above all it gives the USA supremacy over the Western Bloc. Western European countries agreed to place their armed forces within a defence system under US command, and thus recognize the preponderance of the USA. NATO was founded in 1949 in Washington, but became less prominent after the end of the Cold War. In 2002, it had 19 members: Belgium, Canada, Denmark, France, Iceland, Italy, Luxembourg, the Netherlands, Norway, Portugal, the UK, the USA, to which were added Greece and Turkey in 1952, the Federal Republic of Germany in 1955 (replaced by Unified Germany in 1990), Spain in 1982, Hungary, Poland and the Czech Republic in 1999. -that are increasingly blatantly manipulated to serve the interests of the imperial center.

Though extension of universal citizenship was never a tool in the American imperial arsenal, during its struggle with communism in the post-World War II period Washington did come up with a political formula to legitimize its global reach. The two elements of this formula were multilateralism as a system of global governance and liberal democracy.

As Frances Fitzgerald observed in Fire in the Lake, the promise of extending liberal democracy was a very powerful ideal that accompanied American arms during the Cold War. [7] Today, however, Washington or Westminster-type liberal democracy is in trouble throughout the developing world, where it has been reduced to a façade for oligarchic rule, as in the Philippines, pre-Musharraf Pakistan, and throughout Latin America. In fact, liberal democracy in America has become both less democratic and less liberal. Certainly, few in the developing world see a system fueled and corrupted by corporate money as a model.

The Bush people are not interested in creating a new Pax Romana. What they want is a Pax Americana where most of the subordinate populations like the Arabs are kept in check by a healthy respect for lethal American power, while the loyalty of other groups such as the Philippine government is purchased with the promise of cash. With no moral vision to bind the global majority to the imperial center, this mode of imperial management can only inspire one thing: resistance.

The great problem for unilateralism is overextension, or a mismatch between the goals of the United States and the resources needed to accomplish these goals. Overextension is relative, that is, it is to a great degree a function of resistance. An overextended power may, in fact, be in a worse condition even with a significant increase in its military power if resistance to its power increases by an even greater degree. Among the key indicators of overextension are the following:

 the inflaming of Arab and Muslim sentiment in the Middle East, South Asia, and Southeast Asia, resulting in massive ideological gains for Islamic fundamentalists-which was what Osama bin Laden had been hoping for in the first place;

 the collapse of the Cold War Atlantic Alliance and the emergence of a new countervailing alliance, with Germany and France at the center of it;

 the forging of a powerful global civil society movement against US unilateralism, militarism, and economic hegemony, the most recent significant expression is the global anti-war movement;

 the coming to power of anti-neoliberal, anti-US movements in Washington’s own backyard-Brazil, Venezuela, and Ecuador-as the Bush administration is preoccupied with the Middle East;

 an increasingly negative impact of militarism on the U.S. economy, as military spending becomes dependent on deficit spending, and deficit spending become more and more dependent on financing from foreign sources, creating more stresses and strains within an economy that is already in the throes of stagnation.

In conclusion, the globalist project is in crisis. Whether it can make a comeback via a Democratic or Liberal Republican presidency should not be ruled out, especially since there are influential globalist voices in the U.S. business community-among them George Soros-that are voicing opposition to the unilateralist thrust of the Bush administration. [8] This, however, is unlikely, and unilateralism will reign for some time to come.

We have, in short, entered a historical maelstrom marked by prolonged economic crisis, the spread of global resistance, the reappearance of the 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 power among center states, and the reemergence of acute inter-imperialist contradictions. We must have a healthy respect for U.S. power, but neither must we overestimate it. The signs are there that the U.S. is seriously overextended and what appear to be manifestations of strength might in fact signal weakness strategically.