Cancel the debt

Even before coronavirus started spreading around the world, dozens of developing counties were already close to a debt crisis. Lebanon and Argentina have already defaulted on their debts this year; Ecuador and Zambia are on the edge. Behind them, a large group of countries could be pushed into default by the coronavirus crisis, including Angola, Tunisia and Ghana. Even rich countries like Italy face such serious debt crisis that it threatens to rip the Eurozone apart.

Before we had even heard of Covid-19, the International Monetary Fund (IMF) warned that 34 countries were at risk of debt distress. The Jubilee Debt Campaign, a group established in the late 1990s to campaign for debt cancellation for impoverished countries, suggested last May that this was an optimistic assessment. It said 31 counties were already in debt crisis, with another 82 at risk.

After all, not being able to fund healthcare because of debt repayments is a crisis, and more than 60 countries that are struggling to build a basic health system were already spending more paying their creditors than they were on healthcare. This includes Ghana, which is due to spend almost four times more servicing external debt than on public healthcare in 2020.

Many countries face dire health emergencies even at the best of times: Burkina Faso has just 11 ventilators for 19 million citizens; Mozambique has no intensive care unit capacity at all; and Sierra Leone has only one doctor per 50,000 of its people.

That some of the world's poorest countries are repaying vast sums year on year to rich countries, international "anti-poverty" funds – public bodies such as the IMF – and major banks, all while enduring this sort of permanent crisis, is a damning indictment on our global economy.

How can it be that only 15 years since billions of dollars of debt was cancelled for low-income countries, and 10 years since a debt crisis ripped through the developed world, we are back in the same place again?

It is not simply the impact of coronavirus that has created this debt crisis. Rather, the pandemic has exposed, once again, what a crisis-prone and unsustainable global economy we have.

The solution to this crisis will indeed have to include sweeping debt cancellation. But it will also require fundamental reform to prevent the global economy from continuing to operate as a gigantic casino.

The root cause of these crises was usually not profligate government spending on the part of indebted countries, as is so often assumed. Rather, these crises have been built into the neo-liberal economy that emerged in the late 1970s.

Under this model, economic planning is not something done by governments on the basis of meeting human needs, but is handed over to Big Finance, where major decisions are made on the basis of short-term profitability.

The global economy has become a Wild West of speculators and rent-seekers. Business is incentivised to ruthlessly shift the costs of its operations onto the public sector, the environment and future generations. Wealth is hidden offshore, making redistribution impossible.

How does such an economy continue to operate? Through debt. Households that cannot make ends meet as wages are driven down by a global economy that has shifted wealth from the masses to the elite are turning to credit cards or payday lenders.

Excerpted from: 'Don't Delay Developing World Debt – Cancel It'.

Commondreams.org