At the G8 summit in Heiligendamm this June, leaders of the eight wealthiest countries will cry crocodile tears for Africa. As in 2005 at Gleneagles, George Bush and his cronies will discuss a “Marshall plan” for Africa, to “save” the Africans from themselves and their corrupt leaders, to “commit African leaders to democracy and good governance” – meaning to force open their economies even further to multinational companies seeking super exploitation and superprofits – no matter what cost to the people or the environment.
“The £25 billion ’Marshall plan’ for the world’s poorest countries pledged at the Gleneagles summit could re-industrialise Africa, and lift millions out of poverty if it is well directed,” stated UNCTAD, the United Nations’ trade and development arm. Yet it failed completely. Even ex-World Bank economist William Easterly admitted that half a century of trying to “save” the developing world from poverty with £1.1 trillion in aid has failed.
Why? Because these countries are chained to spiralling debt by the imperialist nations. The net financial transfer between developing and developed countries shifted from a balance of £23 billion in favour of developing countries in 1995 to an estimated outflow of £340 billion (around 5% of their gross national income) in 2006 – and the negative shift has been almost exponential since 2001. While most people in Africa live on less than £1 per day, African countries are forced to spend around £10 billion each year servicing old, illegitimate debts to rich governments and their institutions, the World Bank and IMF and African development Bank. Meanwhile, the World Trade Organisation keeps their economies subordinated to Western interests.
The IMF and World Bank were established in 1944, primarily by and for developed countries and better-off developing countries. The World Bank initially funded “development” projects in poorer countries in the 1960s and 70s. But in the late 70s a credit crunch in the US caused short-term US interest rates to double between 1978 and 1981. The rise in rates left many borrowing countries unable to meet their debt repayments in dollars. Default would have meant the bankruptcy of several large commercial banks, so the IMF and World Bank began to make loans to debtor countries to ensure they would not default.
With these loans came greater conditionality. The IMF and World Bank claimed debtor countries had been unable to pay their loans due to failures in the structure of their economies – so they needed to “stabilise” and “adjust” in order to overcome this. A typical IMF structural adjustment program included policies to reduce inflation, increase interest rates, reduce public spending, increase taxation on spending, eliminate subsidies and stabilise the exchange rate by pegging the currency to the dollar. The World Bank promoted the liberalisation of trade, export-led growth, privatisation and general deregulation.
In order to get debts reduced or cancelled, or to get new loans, poor countries had to adopt these policies favoured by the World Bank and IMF. So countries were no longer producing goods for internal consumption, but for trade on the free market and subject to the fluctuations of the market, as well as having to compete with wealthier countries and their subsidised goods. This is what imperialists call “free trade”.
The General Agreement on Trade and Tariffs, the forerunner of the WTO, was aimed at massively reducing barriers and liberalising trade. Former US Trade Representative, Cala Hilla, who spoke for the US under George Bush Senior, summed it up: “I would like you to think of me as the US Trade Representative with a crowbar, where we are prying open markets, keeping them open so our private sector can take advantage of them.”
The WTO was formed in 1995 to advance corporate interests in trade. The free trade that it enforces is not free at all but favours rich countries over poorer ones, forcing the poorer nations to open up their economies to foreign investment and allowing repatriation of profits to the wealthy countries. When controls and assistance are removed, farmers and producers can be left unable to compete with subsidised imports from the US and Europe. This has an especially devastating effect on women, as they produce 60 – 80% of food in poor countries; they and other small scale farmers are the first to suffer from the loss of state support.
Hilla’s statement above illustrates the power imbalance between rich and poor nations. The WTO is a secretive body, with negotiations conducted behind closed doors, and dominated by the G8 powers. Corporations lobby it to overturn national laws that seek to protect workers or the environment against the uncontrolled actions of big business. The Battle of Seattle in November 1999 saw thousands of people take to the street to protest against the strong-arm tactics of the WTO – they succeeded in shutting down the ministerial talks and forced the question of the legitimacy of free trade onto the world stage.
Some believe that global capitalist institutions which economically enforce the G8 agenda can be reformed, and that a “nicer” capitalism can work. We disagree. The capitalist system is a crisis-ridden system, driven to competition where there are few winners and many losers. And when imperialist nations cannot achieve their goals by economic coercion, they use military means. These countries monopolise the world’s financial and productive resources while condemning billions under their rule to repeated bouts of war, ethnic conflict, growing inequality and environmental destruction.
Workers Power calls for the complete cancellation of all Third World debt. We fight for the right of countries to sustainably develop with a democratically planned economy. We fight for the expropriation of all the multinational companies, the giant banks and the national monopolies too. Fundamentally, we fight for the overthrow of the capitalist system – for an international socialist revolution.