Penguin Books. London. 1988 (A Pelican Book Paperback, Economics and Current Event Series). 290 pp. Also Food First Books. Grove Press, New York, 1988, 292 pp.
CLAUDIO SCHUFTAN
schuftan@gmail.com
Did you know that in the 1840s the US itself defaulted on loans owed to Europe and the world did not come to an end? or that current American farm debt is higher than that of Brazil and Mexico combined? Well, these are just two of the questions that the latest book by Susan George will answer for you. Reading the hook is a pleasure, because of the myths that it debunks and the preconceptions that it shatters and because of the wit with which the author sails through a theme that could be otherwise very dry. The information presented and the criticism expressed in many ways depart from the more traditional handling of the topic although the author often draws from the available literature, hut with an inquisitive eye. That is why the book should appeal especially to those social scientists who have reached a point of saturation reading dry and stale (and self-pitying) reviews about the debt crisis.
Right at the beginning the book introduces us to ‘The Consortium’ – the guild of the international high financial institutions – and we get a thorough explanation of most of transnational banks’ everyday gymnastics and witch accounting that has led us. in the last twenty years, to where we are today in world finances. Members of the banking culture the international bankers -are not trained we are told, to entertain (lie notion that their activities might have to do with life and death. They simply administer the correct medicine according to a received dogma.
The West and its Banks has never been a stickler for democracy, we are reminded, so long as the principles of free enterprise are observed. Debt is actually moving us towards increasingly repressive governments. More and more, it is taking strong-armed measures and regimes to bleed people dry to repay the debt. Political repression is perhaps the greatest single obstacle to development these days.
In George’s view: the IMF and its flying squads are actually the messengers, the executive agents, the watchdogs and gendarmes for those who hold financial power in this world; the IMF helps them consolidate their power over the poor and indebted nations by making countries offers they cannot refuse. The IMF actually acts as a channel to funnel public money to private banks; it puts maintenance of bank profits at the top of the list The Fund and the Banks (the Consortium) were made for each other. Moreover the IMF having a rather peculiar idea of market truth, forces Third World countries to increase their participation in world markets (thus often playing these countries one against the other) even if this is against the best interests of the people concerned. Moreover the IMF characteristically grants loans in tranches: each tranche carrying with it stricter and stricter conditions. By doing so, the IMF has ample authority to organize its borrowers’ economies according to its own lights. Had you ever realized, on the other hand. that IMF conditionality never touches arms budgets…? Its self-proclaimed ‘political impotence’ is thus rubbish The Fund has, by default, chosen to disregard social equality as a criterion for its programs. IMF induced cost cutting and ‘better management’ by governments imply reducing the cost of labor which is the only element controlled by exporters facing a glut.
Because of their respective iron codes, the IMF and (he World Bank are unlikely to depart from the standard development model they endorse without popular pressure and that is why Susan George calls for. social organizations, both in the North and in the South, to play a liberating role in breaking the vicious circle of foreign debt and maldevelopment This is more so, because none of the industrialized countries would accept the same kind of discipline the IMF imposes on the poor debtor nations. The antidemocratic practices it imposes would never be tolerated inside a single one of the Western creditor countries.
On the topic of debt and the debt crisis per-se, Susan George has the following to tell us: Debt is marginalizing the peasantry and the urban majority even further. The debt crisis has not created or caused poverty; it has given rise to an unheard-of scope and prevalence of distress, indigence and destitution. Indebtedness, on the other hand, has more than a little to do with rising food insecurity and debt is now one of the main factors contributing to rising infant mortality rates. Debt thrusts millions into hunger The poor and the hungry by definition simply do not count in the debt equation.
We might abolish present Third World debt and dependency altogether, but it could soon reappear, for the model itself has become self-generating. Recovery based on austerity and export surpluses alone is illusory. Conversely. Bankers continue to argue that countries should pursue the same model, hut ‘manage it better’. The tragic irony is that all the hunger, misery and deaths will not even help the country to pay back its debts. The people now expected to pay back the debt are expected to make sacrifices for its reimbursement even if they never saw the color of the money. Debt in 9 cases out of 10 was first racked up by non-elected leaders! With massive foreign debt. the impoverished have become the financiers of the affluent. By now. the size of the poor man’s gift to the rich through transfers servicing foreign debt is $65 billion. It is obvious we need to stop these reverse transfers if for no other reason than because the debt crisis is turning out to he the best opportunity for neocolonial pursuits. It is not always easy to see these connections and those who profit from the debt crisis count on our structural blindness.
Because of the debt. Third World governments are becoming progressively irrelevant to the determination of their own national economic policy. The problem of international debt is, therefore, fundamentally political, more than financial and should be confronted as such. Without a political approach, Susan George contends Southern proposals will make not the slightest dent The South will have to use the real power that only unity can convey. We are thus now talking not economics but politics and politics is not about who has the best argument, but about who has the most money and power. And, although power structures are powerful, powerful does not mean invulnerable, as the author pertinently reminds us.
The very central thesis we are invited to explore next is that the continuing existence of the debt crisis fits neatly with a strategy of Low Intensity Conflict which the North is waging against the South. A simultaneously ongoing Financial Low Intensity Conflict (FLIC) is the under-recognized threat to (he aspirations of the Third World nations and peoples.
FLIC is a variant of neocolonialism sanctioning debt slavery. FLIC is ongoing permanent and global. FLIC is the ‘silent war’ the world is fighting using its financial institutions as proxies. This very resourceful operational approach to understanding foreign debt introduced by Susan George helps us realize why continued acquiescence to FLIC will only contribute to maintaining America’s dominant position in the world. Therefore, the forces that fight FLIC, we are told. could and should primarily transform the debt crisis mainly into an instrument of liberation.