Committee for the Abolition of Illegitimate Debt

(first circulated at the NORWAY CONFERENCE ON CONDITIONALITY 28-29 November 2006

1. Jubilee South welcomes the Conference on Conditionality organized by the Government of Norway. We appreciate the intent of the meeting and its CSO supporters, as we also appreciate the context in which it takes place. It is a welcome opportunity for the different parties to discuss an inherently wrong, unjust and highly resented political tool used by the “donors” and particularly the Bank on governments and peoples of the South.

2. We regret, however, that the chosen focus on the undesirability of “economic conditionality” leaves the impression that non-economic conditionalities may be desirable or legitimate. Drawing a distinction between a purported good or political conditionality on the one side, and negative or economic conditionality on the other is analytically unsound, politically superficial and risks placing even more power in the hands 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.

and external lenders.

3. Jubilee South stands against all forms of Conditionality. The imposition of conditionalities is an externally-driven process that contradicts the principles of sovereignty, democratic self-determination, autonomous decision-making and popular empowerment. As such, any and all conditionalities are unacceptable to Jubilee South.

4. Conditionality, in any of its manifestations, undermines the autonomy of national processes and encourages the reduction of public spaces for citizen’s participation in the discussion and definition of government policies. Practice has shown that political conditionality geared toward achieving “good governance” has failed. Enhanced democracy is the product of citizen engagement and not just the result of getting the right recipe of policy and institutional change. Changes imposed through external pressure tend to be unsustainable because they are not deeply rooted.

5. Political and economic conditionalities are two sides of the same coin-both are impositions wrapped in the latest discourse designed by the rich to “assist” the poor, and make a 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. doing so. The World Bank and the “donor” countries, instead of facing up to the failure of the neoliberal economic development and growth model, pretend once again to place the blame on the victim. Now it is claimed that the skewed development and mounting poverty are the result of “bad” “corrupt” governments-the same governments that have blindly followed the Washington Consensus recipe book.

6. Having succeeded in many countries in imposing, with elite complicity, privatization and liberalization measures, corporate capital is deepening its penetration. This is facilitated by the public sector governance norms pushed by the IFIs, the bilateral lenders, Free Trade Agreements and the World Trade Organization. As the Bank admits, most of its conditions are now in that area, particularly financial “management” to reinforce its ongoing pressure for governments to sustain privatization, trade liberalization and macro-economic orthodoxy in general so as to facilitate and protect the operations of finance capital and corporations.

7. Conditions to impose privatization and liberalization are neither more nor less objectionable than those allegedly leading to good governance. As the Norwegian CSO Networkers stated, “Conditionalities are the “sticks” that the Bank and its donor partners use to enforce their will on the receiver, and constitute an important set of tools in current development policies. Loans and grants “buy” powerful influence, and conditionality is the ticket to that power. The tools of conditionality therefore greatly extends the arsenal of tools that the Bank can activate, and gives it a formidable leverage Leverage This is the ratio between funds borrowed for investment and the personal funds or equity that backs them up. A company may have borrowed much more than its capitalized value, in which case it is said to be ’highly leveraged’. The more highly a company is leveraged, the higher the risk associated with lending to the company; but higher also are the possible profits that it may realise as compared with its own value. over receiving countries”.

8. We hold that “donor” conditionality needs to be analyzed in the context of the chronic poverty, impoverishment and social exclusion that plagues the South. Power is at the heart of the unfair social and international relations that must be changed and not reinforced. In Jubilee South we speak not of aid and conditions, but of the need for reparations and restoration of the historical, economic, ecological, political and social debt that the North owes to the South. The real — and immediate — issue is to secure the unconditional stop to the net flow of resources from South to North in the form of debt repayment and profit remittances that impoverish so many of our countries.

9. From the standpoint of principle, Jubilee South insists that the devolution of what has been taken from our countries over history and in documented matter is a principle not subject to negotiation. This is a question of human rights for both North and South, a matter of justice for the South and should not be viewed merely as a question of choice for the North.

10. We acknowledge that the impulses of charity and sympathy are infinitely different from those of imperial greed and domination through force and 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/ . Nonetheless as long as what is offered is social alleviation rather than core restructuring of the unjust global exploitation system, the same impulses are insufficient and, if not redirected, could lean closer to the positions of “creditors”, leaving the unjust debt order untouched.

11. Democratic social movements and organizations in the South believe that it is the poor themselves that can and must act as their own liberators. When bilateral funders and others in the North demand specific social policies and so-called poverty alleviation measures, they may be undermining the very democratic processes that are key to the empowerment of the poor.

12. “External co-operation” has done much harm to the South, particularly where accompanied, as usual, by high-sounding discourses of democracy. With conditionality as one of its tools, the relationship perpetuated is still one of domination. We call on everyone to closely scrutinize and reject the prescriptions being handed down by the World Bank, as it avidly seeks to become the standard bearer on issues of governance and anti-corruption process. Bilateral cooperation agencies should not continue to accept Bank leadership.

13.Jubilee South calls on Governments in the South not to be deceived or to fall into the trap of accepting the policy parameters dictated by the so-called creditors, lest conditionality deepen the economic, political and ideological occupation. Policy on conditionalities should be addressed not as a matter of “good” v. “bad” conditionality, but as a political question. We must not allow the World Bank to dictate the terms of the debate on governance, development and conditionality.

14. We call on CSOs in the North to
Support the process of social movement building and the demands articulated by those movements for broader and deeper debate on the nature of poverty and debt.
Be in solidarity with -not preempt or substitute-peoples’ movements in their democratic and sovereign process of creating new instruments of governance, modes of interaction with or resistance to governments.
Be respectful of the decision-making process at the level of CSOs in the South.

15. We also call on CSOs in the North and forward-looking development agencies to support the creation of spaces, in the North and in the South, so that people themselves can freely determine their future and create societies free from poverty, debt and war. All attempts to undermine countries such as Bolivia and Venezuela that are taking important steps to democratize and practice alternative development must also be rejected.

16. We enjoin you to broaden the debates within all our countries and tackle the links between economic power, multinational corporations, war and militarism, and address the issues of exploitation and colonialism (old and new).

17. The struggle against debt and conditionality should serve and be part of the struggles of the poor for the redistribution of economic and political power. Our struggle is not to ‘humanize’ an inherently cruel international power structure, but to change it.