G8 Gleneagles summit: Capitalism is not the solution – it is the problem

The G8 countries are to meet at Gleneagles in July. In the build up to this summit the Blair government has been making a lot of noise about debt relief. But instead of going down the debt of the underdeveloped countries keeps going up. Mick Brooks looks at why this is happening.

According to Oxfam, if things continue to go on as they are now in Africa, by 2015:

  • 45 million more children will die
  • 247 million more people will be living on $1 per day or less
  • 97 million more children will not be in school
  • 53 million people will be without proper sanitation.

Clearly, something must be done. Will the G8 and the Gleneagles meeting do anything to relieve world poverty?

The G8 meeting due to take place at Gleneagles in July is a real summit meeting of world capitalism. The Group of Eight nations are the USA, Canada, France, Britain, Germany, Italy, and Japan, the heartlands of the giant multinationals that dominate world trade and production, plus Russia. Tony Blair wants to go down in the history books as something more than a squalid war criminal. He is anxious to present the summit as an opportunity to “deal with” the burning issues of world poverty, disease and climate change.

The rulers of the world at Gleneagles already have other permanent institutions to enforce their will on poorer and weaker countries – the International Monetary Fund and the World Bank. The rich lend to the poor, and one of the main issues before the G8 is third world debt. Debt is one of the main levers for keeping poor people poor. Interest repayment represents a huge continuous transfer to rich nations and an unbearable burden on underdeveloped countries. Gordon Brown has pointed out that Zambia spends more on debt servicing than on education and Malawi remits one third of its government budget direct to rich countries – twice what is spent on its own people’s health. (Life expectancy in Malawi is 39.) Congo-Brazzaville’s debt is nearly twice its National Income (NI), while Sao Tome and Principe groans under an incredible burden of nine times NI.

Rich countries lend directly to poor countries. This is called bilateral lending. Then there are private loans between western banks and nation states. Finally, advanced capitalist countries club together through the IMF and the World Bank to lend – called multilateral assistance. The IMF and the Bank are both owned by their shareholders, like any other bank, and a majority shareholding is held in both by the advanced capitalist countries. Just like other capitalist firms they aim to maximise shareholder value – and that means making sure the lenders get their money back, with interest. This entails nosing in to the affairs of debtor countries, imposing conditions on loans and telling the governments what to do – not very democratic! The IMF in particular has a standard blueprint called a Structural Adjustment Programme it imposes on poor countries, with knuckledusters if necessary. Read Jamil M. Iqbal’s article “Bangladesh and the World Bank saga” to see how SAPs impoverished Bangladesh.

The “financial sheriff” marches in and tells the delinquent government to cut its coat according to its cloth and stop wasting its budget on health and education. It should stop printing money. The rich countries don’t want the value of their loans to be harmed by inflation. Other conditions are imposed like a heartless moneylender. SAPs have been a disaster for the countries they have been imposed on. In fact a feature of the resistance to the terms imposed by the rich on the poor is the “IMF riot”.

The riots usually start as peaceful protests. The violence comes when the local elites send in troops and riot police to impose the will of the financial enforcers on their own people. The World Development Movement reckons there have been 238 such riots in 34 countries between 1999 and 2002, with over a hundred fatalities and thousands of arrests.

One of the main proposals before the summit is for cancellation of $55 billion of debt held by the IMF and World Bank on behalf of 18 of the poorest nations, with nine more to get the benefits when they show they are good boys and girls. The proposals have been hailed as a giant step forward for the world’s poor. In fact the Make Poverty History coalition is calling for $50 billion in extra aid. The write-off will contribute just $1.5 billion.

In any case we have been here before. In 2003 at the Evian summit they decided to waive $100 million of the burden on a handful of highly indebted countries that had swallowed their nasty IMF medicine. It never happened. After the speeches, Oxfam complained, “the World Bank and its board continue to fail to deliver on its mandate and its vision, most visibly on debt relief.” This is like complaining about a tiger failing to deliver on its mandate to vegetarianism. The IMF and the Bank are institutions designed to suck the lifeblood out of poor people living in poor nations.

Why are poor countries so in hock to the rich nations? One of the main reasons is the collapse in the prices of the things they sell to the advanced capitalist countries. Take coffee. Five grams sell in the West for £2, so a kilo costs £400. Nestle and the other big processors buy that bag for just £70. Just 0.2% of the price of a cup of coffee bought in London goes to the growers.

One reason for the collapse in primary prices is the way the multinational food companies play poor countries off against each other. Vietnam has no history of growing coffee. They are all tea drinkers over there. Over the past decade it has emerged as one of the biggest coffee producing countries in the world, contributing to worldwide overproduction and a collapse in prices. Coffee prices have fallen by 70% since 1997.

So trade, far from being an engine for growth, is a means of impoverishing the “third world”. And that’s not just bad luck – it’s policy. The third institution enforcing imperialist norms and exactions on the world is the World Trade Organisation. The WTO imposes “free trade” on poor countries. They are forced to open up their markets. Haiti, for instance, opened its doors to US grain imports. As a result, thousands of peasant farmers lost their livelihoods in the poorest country in the western hemisphere. The grain that poured in from the USA was exported by agribusiness heavily subsidised by the American taxpayer.

As for the “level playing field” the WTO is supposed to enforce, while third world farmers are thrown to the wolves, farming is subsidised in the West to the tune of $1 billion a day. For instance in the States, $4 billion is shelled out to 25,000 cotton farmers – that’s $160,000 each, more than their crop is worth. As a result poor farmers find themselves incapable of making a living on the world market. In addition they are confronted with tariff barriers of $100 billion against their products, more than twice the aid they get from the rich countries. Europe’s Common Agricultural Policy also keeps out third world farm produce as well as subsidising European producers.

So long as the terms of trade continue to move against the poor countries, and as long as world trade is rigged against them, then debt relief will give no lasting way out of the poverty trap they find themselves in.

So where does aid come in? Tony Blair wants to step up the level of aid going to the poor and needy from the advanced capitalist countries. Who could possibly object? But where does this aid actually go? ActionAid has recently reported that less than 40% of government aid actually goes abroad to where it is needed. In France and the USA, 90p in every pound is spent in the country of origin. Two fifths of it goes to pay well-heeled consultants in the advanced countries.

As an example, let’s look at the deal set up by the British Department for International Development set up with Tanzania. As part of IMF “conditionality”, Tanzania had to privatise its water supply and hand it over to a British firm called Biwater. The deal was partly subsidised by aid channelled from the Dfid. Suspicious? £36 million of our money went straight to PriceWaterhouseCoopers, the accountants, and a bunch of crazed Thatcherites called the Adam Smith Institute to advise on privatisation. The Tanzanian government has since had to sack Biwaters for incompetence.

The reader may ask: what is this Dfid obsession with forcing poor countries to privatise their water supply? After all, 95% of clean water is publicly provided and 1.1 billion people still have no access to safe water – the most basic requirement of life. Just give them the money and let them build the necessary infrastructure! They forget that aid is seen by the Dfid as a crowbar for British capitalism to muscle in on public provision all over the world.

The right wing also questions the usefulness of government aid. Their angle is different. They see the main problem as corruption, especially in Africa. As a result, they say, the money just pours straight out without even touching the sides. There is truth in this. A spokesperson for the Royal African Society has pointed out that for every £1,000 in loans that comes in £1,450 in capital is exported. Whose fault is that? The IMF imposes a condition of free capital movement on poor countries as part of its Structural Adjustment Programmes.

After all, Africa is a capitalist continent. That means the ruling elite is on the make, just like our lot. Our ruling class recognises them as kindred spirits. For decades the West has propped up voracious figures like the cannibal Emperor Bokassa in the Central African Republic and Mobutu in the Congo. The deal is that they can squirrel away the aid provided by the well-meaning western taxpayer as long as western capitalists can loot the natural resources of their countries. In terms of natural assets, Africa is not poor. It is probably the richest continent in the world. But imperialism finds it profitable to keep its people poor.

Aid is pathetically low. But for it to be useful in combating poverty, it has to be disentangled from its use as an imperialist bribe and sop. For more than thirty years the pledge to give 0.7% of advanced country income in aid has lain on the table. The US gives £10.4 billion, just a pitiful 0.16% of National Income. By contrast they had no problem finding ten times as much – £105 billion – to invade Iraq and steal their oil.

The outlines of a deal within the G8 are emerging. There will be some debt write-off.

But Bush and his gang will not allow the level of aid to increase. And as long as imperialism holds the poor countries in its grip, we will never make poverty history. For the issue of debt, for trade and for aid the G8 is not the solution. It is the problem.