The West must take less

By Ann Pettifor

THE IMF described Jubilee 2000 attempt to make creditors face reality and write off bad debts as `frankly unrealistic'. In light of effective defaults in Indonesia and Russia, and impending defaults in Latin America and Africa, we cannot agree. Some one is highly unrealistic about capacity to pay, and it is not us. What are we saying? And what is our alternative?

We say a large share of Africa's sovereign debt will never be paid, even at great human cost. We want creditors to face up to mistakes, and write off debts. We think they are keeping debts on the books, to keep poor countries on the leash. They are punishing the poor for mistakes made by elites in Washington as well as Africa. They are using the debt to prise open markets, and pick up assets cheaply. We think this is plain immoral.

We say writing off poor country debts will cost very little. We have done calculations to prove it. The cost to the British taxpayer of writing off debt owed by 52 countries will be 4 pence a week, If they are unpayable, the cost of course is nil, as no revenue will accrue. These calculations apply equally to other Western creditors.

We are attacking double standards. We note that Britain owes the US $14.3bn, and is simply refusing to pay. OK, it is an old debt—but the US Treasury keeps it on the books. The sum of $14.Sbn is what all the poorest countries owe Britain. It is more than what the whole of sub-Saharan Africa owes the US. So why shouldn't poor countries simply follow Britain's example, and refuse to pay. In 1953 Germany was given massive debt relief by the Allies. This meant she had to divert only 5% of export revenues to debt service. Today, the German representative on the IME board requires the poorest country in the world, Mozambique, to devote 15% of export revenues to debt service. Double standards, again.

We are saying creditors call the shots, and that is unjust. We want relations between debtors and creditors to be governed by the law, not by greed. We want a new independent open and fair process for regulating international debtors and creditors.

And what development model can African countries follow? They could do no better than study the Western model. These economies, as that great African thinker Abdul Rahman Babu once argued, are based on three pillars: agriculture, textiles and construction. These sectors enable any nation to feed, clothe and house people. IMF policies undermine these sectors. They encourage African states to export raw materials, undermine subsistence agriculture and local businesses, and turn these societies into markets for imported food and irrelevant consumer goods. In the West the three key sectors still underpin all other economic activity, and are heavily protected.

Africa should follow the model of Britain and other Western nations, and not embark on further development until it has increased the capacity to save. On the eve of the industrial revolution (1760-1780), British investment constituted little more than 5%, but certainly less than 10% of CDP. In other words, after roughly 5,000 years of city civilisation, it was still necessary for the (then) most advanced economy to devote 90% of its economy to immediate consumption. Once the initial breakthrough was achieved, higher proportions of the economy were devoted to investment. Africa will have to do the same.

There are two arguments against this. First, Africa has no savings capacity. This is not true. As Jacques B Gelinas has shown in his book Freedom from Debt, the big state and international banks have failed the people of Africa. Africans are in bondage to foreign creditors, while there is a vacuum in the domestic financial savings sector. `Finance, like nature, abhors a vacuum', says Gelinas, and so micro finance institutions have stepped in. Like the Tontines in Cameroon, and the Naam groups in Burkina Faso. They have done more than mobilise finance. They have mobilised women, the outcasts of the banking world.

Second, say the opposition. Africa has to `catch up'. With whom and with what? Japan `caught up' 150 years after Britain; Sweden 50 years after the rest of Europe. Needs are always relative. First Africa must escape from debt bondage. Then she needs to feed, clothe and house her people. Only then can she develop. For this she does not need foreign loans. Africa does not need the West to give more. She needs the West to take less.

Ann Pettifor is the Co-founder and Director of Jubilee 2000, and co-author with John Garrett of In our own backyard .. Britain and debt. Available from Jubilee 2000, P.0. Box 100, London, SE1 7RT, UK.

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