June 30, 2005
Seeing President George W. Bush and British Prime Minister Tony Blair touting their good deeds on behalf of the world’s poor is enough to make any opponent of empire and corporate globalization cringe. Perhaps because of this objectionable sight, progressives have been divided in their response to the announcement of a major deal on debt cancellation. In advance of next week’s summit in Scotland, the leaders of the G8 industrialized countries, led by Bush and Blair, agreed to cancel 100 percent of debt owed by 18 of the world’s poorest countries to the IMF, the World Bank and the African Development Bank.
While some on the left have applauded the deal, many others have focused on asking, “What’s the catch?” Some have gone so far as to charge that the agreement actually does more harm than good by attaching harmful strings to debt relief.
Certainly, there is reason to be skeptical: You don’t have to be a hardened cynic to wonder about the true scope of Bush and Blair’s compassion. Yet ultimately, the debt deal, while far from perfect, is a genuine advance – the product of a decade of increasing social movement pressure. No doubt, those who have campaigned for debt cancellation or sympathized with the cause should publicize the limits of the agreement and push for greater change. But we should do this while also celebrating the progress we have made. Rather than letting the leaders pretend that the debt cancellation sprang from the goodness of their hearts, observers should insist on giving credit where credit is due – highlighting the dedication of activists throughout the world who have moved the injustice of debt to the fore of international discussion. Those progressives who have attacked the debt deal emphasize that, even in announcing the cancellation, G8 finance ministers explicitly reaffirm a neoliberal economic paradigm. In their statement, the G8 leaders declare that “boost[ing] private sector development” and “eliminat[ing] impediments to private investment, both domestic and foreign” remain central to their model for development. With regard to debt relief, they state that “good governance, accountability and transparency” will be required for countries to receive cancellation. Historically, such terms have been code words for the imposition of structural adjustment on poor nations. According to G8 ministers, a country practicing “good governance” is one that wholeheartedly embraces the Washington Consensus.
While the rhetoric of the G8 statement feels disturbing, such posturing comes as standard fare in official foreign policy declarations. In practice, the G8 deal does not create new conditions for cancellation. It merely keeps in place the conditions required by the existing Heavily Indebted Poor Countries Initiative, or HIPC.
HIPC was created in 1996, and expanded in 1999, in response to a growing chorus of advocates demanding debt cancellation. The program promised relief to 42 “qualified” poor countries, largely in sub-Saharan Africa. However, in order to have debts cancelled under HIPC, the countries had to go through years of World Bank and IMF-mandated economic restructuring. Even the countries that did so saw their debt service payments decrease, on average, by only 33 percent. The final goal of the HIPC program was to eliminate just 65 percent of the countries’ debts – far less than full cancellation.
Under the new G8 agreement, 18 countries do receive full debt cancellation from the IMF and World Bank, and nine other countries may be granted similar relief at a later date. The 18 chosen countries are those that have reached “completion point” under HIPC, meaning that they have already complied with the onerous economic mandates. Since the G8 deal keeps this “conditionality” in place, new countries wishing to be included in future cancellation must still endure neoliberal “adjustments.” Obviously, this is a problem.
That said, it is clearly better for poor countries that have already suffered HIPC conditions to receive full cancellation, rather than inadequate, partial relief. Full, 100 percent cancellation has been one of the foundational demands of the debt relief movement. It is something that has been resisted by wealthy nations through years of mass protests and persistent lobbying. By affirming the legitimacy of this long-denied demand, the G8 agreement sets a landmark precedent.
This breakthrough represents a significant victory. It marks a shift of at least a billion dollars a year in resources back to poor nations. Arguably the most effective form of aid, debt cancellation allows countries to retain and use their own funds to advance human development. Contrary to the claims of conservative critics, it works. Even the limited cancellation achieved through the HIPC program produced some impressive results. World Bank statistics show that between 1999 and 2004, the 27 countries that had received partial debt relief under HIPC were able to almost double their spending on poverty reduction programs – including education, health care and clean water. In one example, some 2.2 million people in Uganda gained access to water as a result of a post-1997 debt cancellation.
Some large European aid groups, and even progressive stalwarts like John Pilger, have complained that, in order to finance the debt deal, the United States will be shifting some funding away from World Bank “aid” programs.
Countries will lose in aid what they gain in debt service relief, the argument goes. However, this is a misreading of the compromise that was brokered in order to push through the debt deal. While some funds will indeed be redirected, the United States and other lenders have agreed to make more money available for Bank “aid” in order to meet demands for a net increase in funding. For Pilger and the charities, that should qualify as a victory – albeit a partial one. For those of us who don’t look upon the defunding of the World Bank as such a bad thing – including advocates in the Jubilee South coalition – the question remains as to why such advocates were so set on “additionality” in the first place.
Perhaps more important than what has already been gained, the debt deal puts advocates like those in the Jubilee movement in an excellent place to advance further demands. Ending conditionality will be easier now that full cancellation has been accepted as both morally just and politically feasible. Moreover, G8 nations have progressively less ground on which to deny relief to countries beyond the 18 already included. In addition to the 20 other countries still in HIPC, debt relief advocates can devote their attention to highlighting the plight of indebted poor countries like Haiti, Nigeria and the Philippines, which were not included in the previous program because of the specific formulas used by the World Bank to determine eligibility.
Likewise, the movement is now poised to force the issue of “odious” debt on the G8, challenging the legitimacy of debt incurred by repressive regimes in places like Indonesia, Chile and South Africa. While odious debt, as such, is not included in the current deal, the [argument] has contributed to the momentum that has been building around the issue at least since the Bush administration campaigned to have Iraq’s odious, Saddam Hussein-era debts forgiven.
Finally, in addition to ending conditionality and lengthening the list of countries getting relief, activists will be able to leverage the G8 precedent while working to expand the list of institutions canceling their debts, forcing often-overlooked multilateral creditors like the Inter-American Development Bank to live up to the established standard.
The debt deal both represents a measurable improvement over the previous state of affairs and puts advocates in a much better position to push for greater gains. That, in short, is a fine definition of a victory. In a world of challenges and setbacks, where the obstacles confronting progressive movements are enormous, it is all too easy to wallow in despair. If for no other reason than that, we should take care to claim our wins – and to celebrate them – before continuing with the work ahead.
Mark Engler, a writer based in New York City, is an analyst with Foreign Policy In Focus. He can be reached via the web site www.DemocracyUprising.com. Research assistance for this article provided by Jason Rowe.