17: THE ROT AT THE ROOT IS THE DISEASE OF DEBT
In this article, Errol Baird focuses attention on the debt4inance flaw of the global economic system by pointing out that the developing world’s debt burden grows yearly with little hope of repayment.
New debts are contracted to pay off current interest charges, resulting in a continual haemorrhage of wealth from poor countries to Western banks, governments, corporations and agencies like the IMF and World Bank.
It is reprinted from the Autumn 2002 edition of The Guardian Bulletin, the magazine of the New Zealand Democratic Party, which bills itself as "The financial reform Party of New Zealand". P0 Box 40364, Glen field, Auckland, New Zealand www.democrats.org.nz
Our modern media have given us images of violent confrontation at World Trade Organization (WTO) meetings, demonstrations and violence in Genoa, violence in Zimbabwe, of death and destruction in Liberia, Rwanda, the Balkans, in Colombia, inter-and intra-nation confrontation that seems to have no end or answer or does it?
And all of this in a world of plenty and even subsidised over-production coupled with supposedly constant economic growth and conspicuous, gaudy consumption and environmental destruction in pursuit of wealth.
Do we understand why and what could cause such misery for many and at the same time such unnecessarily vulgar displays of opulence for some?
• The principal source of Third World income is from primary bulk agricultural production and the exploitation of all natural resources either minerals or habitats. Often this production is for, and at the mercy of, large multi-national corporations that receive very favourable terms from governments, and who contribute little to the local infrastructure.
• Growing populations of poor and poorly skilled who are seen as sources of exploitable cheap labour often having to work in appalling conditions for a few cents an hour.
•Little ‘added value’ to production and consequentially a high dependence on imports for consumer and other technical goods.
• Serious social and physical infrastructure problems stemming from low levels of government income which usually leads to high dependence on aid, development loans and other borrowing to top up that income.
• Generally poor facilities for education, health, housing, potable water, waste treatment and disposal, roads and transport, which seriously hinder development.
• Many struggle in poverty where there are low levels of employment and attainment in literacy and numeracy.
• Very high internal and external debts often more than 100% of GOP. A large proportion of a government’s income (can be as much as 60% and more) is used for debt servicing leaving little for essential services.
• There is usually a parallel ‘unofficial’ (or undercover) cash economy usually in US dollars often fuelled from the proceeds of crime. This is not measured and so does not contribute to government income.
• A heavy dependence on remittances from the many nationals who have emigrated. Migration to the developed world is a preferred choice of the educated middle class.
• Extreme disparities of income between the rich and privileged few and the majority poor. In some countries this is related to one’s ancestry and colour..
• Poor economic models and management, often resulting from programmes that are imposed by the World Bank and IMF. These programmes are often inappropriate to the cultural and social circumstances. This can be accompanied by rampant inflation and widespread corruption.
• Widespread illicit activities especially involving drugs and precious metals and gems, with much violent crime and use of guns.
All of this adds up to a situation that guarantees keeping the poor poor and the rich rich: to lock in Third World dependence on the whims of financial powers in the developed world.
I quote from the World Vision Impact magazine (Summer 2000): "What’s firing people up? Why are sober-suited trade ministers being subject to pickets, abuse, and disruption of their cosy meetings? It’s all about globalisation — a push towards ending protectionism and freeing up world trade. Or as the anarchists, environmentalists and anti-capitalist protesters would have it — a nasty plot by moneygrubbing corporations to steal more of the world’s resources for themselves."
While preaching the free market, wealthy nations are hitting the Third World hard through:
• Tariffs: Slapped on the developing world imports, inflating their prices and making it tough for them to compete.
• Quotas: Rich nations enforce quotas — limiting developing world produce reaching their markets.
• Export subsidies: These can cripple farmers in poor nations by forcing world commodity prices down.
The ‘bottom line’ corporate mentality aided and abetted by the IMF, World Bank and WTO has caused a massive shift of wealth from the poor to the rich at an ever-increasing pace.
Ever-increasing borrowing of debt-money and attendant inability to provide adequate social infrastructure especially in education leaves most Third World peoples more and more disadvantaged and unable to compete in the modem world’s economic and business activities.
Populations that are characterised by poor levels of numeracy, literacy and work skills — with considerable unemployment, and living in poverty exacerbated by population drift to ever-larger urban areas with extensive slums lacking basic social amenities — are pushed to the margins of their society.
These intolerable conditions breed frustration, anger, bitterness, and resentment that so often leaves a social vacuum that is quickly filled by all manner of crime especially involving drugs and often of the most violent kind.
At times this spills over into civil war tribe against tribe, ethnic against ethnic, ruling class against the marginalised, not because of ideology, but bout who controls the limited spoils and resources.
The root cause of so much violence, civil war, distrust, crime, deprivation, cycles of boom and bust, plenty and famine is not found in nationalism, religious intolerance, cultural clash or overpopulation — for these many causes are only the symptoms of debt, debt and more debt
Marginalised peoples and countries find their sovereignty, economy and resources increasingly subservient to the need to service an ever-growing mountain of debt that can never be repaid.
We need to work to reverse this disaster, to promote a sound economic system that is not based on creation of debt-money, to promote reform not only in a national, but also in a world context.
We are grateful to Errol Baird for his comprehensive description of the ills spread by the present global economic model.
Many people in the developed world are quite sympathetic to the plight of people in the developing world, as elaborated by Mr Baird in his article.
But at the same time, many people in the developed world — often struggling hard themselves; struggling to keep their job, struggling to pay the mortgage, struggling to pay their debts, struggling just to survive — are not going to be particularly sympathetic to any analysis which appears, or which they interpret, to blame them, personally, for that plight.
Nor are they going to be sympathetic to any perceived "solution" which requires them to altruistically sacrifice their own jobs and income for the sake of unknown people in faraway lands.
Nor do they want to listen to any sermons which appear to place such a penance upon them.
Therefore, any analysis of the present global economic situation, and any suggested solutions, must consider, and have sympathy for, both the needs of the developing and developed world alike.
As an alternative to the present global economic model for trade, and in addition to the debt-free money proposal advocated by Money Reformers, PROSPERITY supports the "Protect the Local, Globally" model as advocated by Colin Hines in his book Localization: A Global Manifesto.
As he stated in a letter in The Guardian, 9 September, 2003:
"Your leaders on the TUC conference and Cancun (September 8) made no mention of the link between the two. The TUC wants an end to job losses and unbridled employer power, and the development lobby wants trade to work for the poor.
The former fails to realise that the closure of steel works, followed by the relocation to Asia of the call centres that were supposed to replace them, is a factor of open markets.
"For its part, vocal sectors of the development lobby seem locked into the increasingly discredited idea that fewer trade barriers will alleviate poverty.
"The reality is to pit poor farmers and workers in the third world in ruthless export competition with each other to grab more of rich countries’ markets at the expense of jobs over here.
"The alternative to the reduction in trade barriers being called for at Cancun has to be for elected governments to protect their domestic agriculture, industry and services.
• "The gradual reintroduction of trade barriers, allied to domestic policies and redirected aid and trade rules that prioritise diversification of local economies is the only way to protect livelihoods and reduce poverty, both north and south."
In order to optimize the benefits of a debt-free money policy both nationally and internationally, the Money Reformers’ debt-free money proposal needs to be allied with a wider economic model for trade, such as Localization.
Two essential books on providing this alternative are:
On money reform: Goodbye America! Globalisation, debt and the dollar empire, Michael Rowbotham, (Jon Carpenter Publishing, 2000)
On an alternative economic model for trade: Localization: A Global Manifesto, Colin Hines, (Earthscan, 2000)
- from PROSPERITY, August 2003