Shirking responsibility

Reverend Blair
Vive le Canada
June 17, 2005
“If a despotic power incurs a debt not for the needs or in the interest of the State, but to strengthen its despotic regime, to repress the population that fights against it, etc., this debt is odious for the population of all the State.” –Alexander Sack, 1927

The G-7 finally made a move on debt forgiveness this past weekend.
Their hand supposedly forced by public opinion and the star power of
rock singers, the richest countries in the world decided to donate $55
billion to the poorest countries in the world by way of debt relief.
The nations involved, as well as the International Monetary Fund (IMF)
and World Bank will be patting themselves on the back for this for some
time to come. That most of their self-congratulatory backslapping is a
hypocritical smokescreen doesn’t seem to play much of a part at all.

Hypocritical backslapping? They are giving massive amounts of money
away to a good cause, aren’t they? They are helping the world’s poorest
nations. Some of those nations have been paying back thirteen dollars
for every dollar they originally borrowed. They deserve a break and
they are finally getting one. How can that be hypocritical? The problem
arises with the concept of odious debt.

Odious debt is debt incurred by a government that does not go to help
the people that government is representing. It is the money that builds
palaces while people starve or ends up in Swiss Bank accounts. Some of
it pays for militaries used to oppress the citizens, some of it goes to
pay bribes so foreign corporations can come in to make profit. It is
the pay-off of official graft and corruption.

The G-7, to be fair, has promised to address the problem of odious debt
by forcing countries asking for debt relief to clean up their
corruption problems. No clean up, no relief. It is what Tony Blair was
talking about when he said, “We require the African leadership also to
be prepared to make the commitment on governance against corruption –
in favour of democracy, in favour of the rule of law.”

It is very noble of Mr. Blair to want to clean up corruption in the
developing world. It is something that is long overdue. It would be far
better if Mr. Blair, and his friend Mr. Bush, and all of the other
leaders who are trumpeting the necessity of tying debt relief to the
clean-up of corruption would take responsibility and admit that
corruption is not a one way street. Every bribe taken requires somebody
to pay that bribe. Every loan that becomes an odious debt requires a

These debts didn’t come from nowhere. When Paul Bremer asked for debt
relief for Iraq, the case he presented was that Saddam had taken
foreign loans and built palaces while oppressing his own people. Paul
Bremer, for once in his life, was right. What Bremer didn’t say, what
nobody wants to say, is that the nations that Saddam was borrowing
from, including the USA, knew exactly what the money was being used
for. So did the lending institutions that gave the loans and the
corporations that invested in the various projects. Debt relief, the
forgiving of loans made, was not really necessary because the loans
were not legitimate in the first place. The debt owed by Iraq and other
developing nations is odious debt.

The concept of odious debt has been around for about a century and has
precedent in international law; so the nations, lending institutions,
and corporations who are owed money have little legitimate claim to the
debt that is being forgiven. A mere decade ago, the same people who are
now trumpeting debt relief were saying that cancelling these crippling
debts was impossible. So what caused them to change their minds?

It wasn’t public opinion, the G-7 has been ignoring protestors for
years. It wasn’t the rock stars either. Bono is famous, but he’s not
that influential with men in suits. Bob Geldof hasn’t been heard from
much since the original Live Aid concert. Sure Roger Waters is getting
back together with Pink Floyd, but it isn’t like Syd Barrett is coming
back or anything. Besides, somehow I can’t imagine the people at the
G-7 taking even Barrett’s return as some kind of sign that they have to
change their ways. The image of a bunch of finance ministers passing a
joint around and listening to See Emily Play is kind of entertaining,
but I doubt that it would be enough to induce any generosity in them.
So what has brought on this surge of generosity?

There is the matter of the debts being uncollectible. These nations do
not have any money and the debt they currently have is pushing them
further into debt even while they require more and more aid. There is
also the matter that at rates that have developing nations repaying as
much as $13.00 for every dollar borrowed, much of the original debt has
been repaid.

Those are small matters though, not the kind of thing that the World
Bank or IMF have found overly troubling in the past. There is something
more pushing them. If the debt is not forgiven, eventually somebody is
going to cry odious debt and the matter will go to court. When things
go to court, uncomfortable details tend to come out.

That is not the kind of thing that the leaders of the G-7 and the
people at the World Bank and IMF want to happen. By forgiving the debt
they avoid having their past actions too closely examined. There isn’t
a country in the G-7 that hasn’t loaned money to somebody they
shouldn’t have and corporations from the developed world have been
deeply involved in graft and corruption in virtually every developing
country that they work in.

One example of this is the tiny African nation of Lesotho. When they
were building the Lesotho Highlands Water Project, the government of
Lesotho hired 12 of the world’s largest engineering firms. Since the
project was a huge mega-project, the construction of five dams to
redirect water from Lesotho to South Africa, the expertise of such
corporations was needed. G8 countries were involved in the financing of
all five dams, either directly or through agencies they have control

Interestingly enough, South Africa, which was to receive all of the
water from the Lesotho Highlands Water Project, was under sanctions
when the funding for the project was originally given the go-ahead. The
project itself amounted to sanctions busting.

In 1998 South African troops invaded Lesotho to restore order because
of anti-government demonstrations. The South African fear was that the
dams would be damaged. 17 protestors were killed. The project

There were bribes and corruption throughout the project. The project
was originally estimated to cost $3.4 billion, but by its completion
the cost had risen to about $20 billion. Some estimates put the cost of
bribes and corruption as high as $500 million. The government of
Lesotho pressed charges against several companies and individuals from
several countries, including Acres International of Oakville, Ontario.
Acres International lost their case and was found guilty of paying
bribes. Export Development Canada, a crown corporation that oversees
contracts to corporations bidding on aid and foreign development
projects, refused to bar Acres International from further contracts
with them. No charges were pressed in Canada. The World Bank did a
further investigation and found that Acres International had paid
bribes. The World Bank imposed a three year ban on contracts with the
Oakville-based company … a slap on the wrist. Still, that slap was
much more than the Canadian government was willing to do.

Acres International and the Lesotho Highlands Water Project are not
unique. Halliburton and American Vice President Dick Cheney, along with
Shell Oil, are under investigation for corruption while building a
refinery in Nigeria. Britain, France and Germany have all made loans to
corrupt dictatorships. Until recently bribes paid to foreign officials
were not only legal in the UK, since the actual crime took place in a
foreign country, but the bribe was tax deductible as a commission.

The corruption issue is not an African problem, an Asian problem, or a
South American problem. It is very much problem of the wealthy nations
of the world. It is our corporations that pay the bribes, our banks
that give the loans, and our governments that turn a blind eye to
corruption while making loan guarantees. The International Monetary
Fund and the World Bank are our institutions, not the institutions of
the developing world.

The debt that we have imposed on developing nations, sometimes pushing
it as a requirement of aid, is our problem. The promise to forgive debt
on condition of developing nations cleaning up their corruption without
openly addressing our own role in that corruption is dishonest.

Instead of taking the responsibility for our actions, the leaders of
G-7 are trying to shift all blame to developing world while keeping
their own past errors and instances of corruption from becoming public.
That will not solve the problem. In fact, the shirking of that type of
responsibility is likely to magnify the problem because it creates a
built-in excuse for cancelling the debt relief plans if corruption
continues, even if that corruption is instigated by western
corporations or officials. If our leaders do not accept responsibility
for our role in the corruption inherent in the debt crisis, we are
doomed to make the problem worse, not better.

To read more articles by the author on the Vive le Canada Web site, please see:

Categories: Africa, Debt Relief, Odious Debts

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