Mon | Dec 11, 2017

Glenn Tucker | Debt, dishonour and deceit

Published:Sunday | November 26, 2017 | 12:00 AM
Glenn Tucker
Christine Lagarde, International Monetary Fund (IMF) managing director, at the IMF panel discussion with heads of Government at The Jamaica Pegasus hotel on November 16.
1
2

"If the debtor is in difficulty, grant him time till it is easy for him to repay. But if ye remit it by way of charity, that is best for you if ye only knew."

- Qur'an 2:280

 

Managing director of the Inter-national Monetary Fund (IMF), Christine Lagarde, has been wondering aloud of late. She can't seem to understand why Caribbean countries are not experiencing growth.

Just as my blood pressure was set to go through the roof, I saw an equally irritating statement from our prime minister, Andrew Holness. It goes something like this: "The imposition of hardship has been generally due to the policies that the countries of the Caribbean pursued for many years and it is disingenuous to say that the IMF imposes hardship." Really, Prime Minister?

Permit me to remind the PM that this problem started when OPEC states were allowed to cut supplies and cause the price of oil to skyrocket. This created a vicious cycle that saw developing countries needing loans to pay for this expensive commodity. As inflation and recession loomed, countries like the United States and United Kingdom pushed up interest rates to unserviceable levels. And institutions like the IMF and World Bank encouraged us to engage in a reckless lending strategy devised by Western banks.

When the IMF stepped in, we were made to believe that the cause of our problems was exactly as our PM is now stating. No, Mr PM. I have no doubt that some carelessness and corruption were involved. But, politics aside, what were the options available to countries caught in this web of deceit?

Prime Minister Holness is blaming Caribbean countries for their fiscal profligacy. So let me cite examples far from our shores and long ago.

Twenty years ago, Zambia spent 40 per cent of its total budget to repay foreign debt and only seven per cent for basic services like vaccines for children. With 19,000 children dying every day from causes attributable to this debt burden, 21 million children could have been saved in the world's 20 poorest countries by 2000.

Nigeria borrowed US$5 billion, has paid back $16 billion, and still owes $28 billion.

Can anyone explain how these countries could devise a strategy for growth under these circumstances? Mrs Lagarde is happy with the "progress" Jamaica is making. That's because we have been making our payments on these odious debts on time and our currency has been bastardised to the extent that whatever primary products we have to offer are obtained cheaply by the countries whose interests she serves. So the IMF is pleased.

But we have no roads. We have insufficient working street lights. Public servants have been toiling for years without a decent wage increase and our leaders are trying to make blood out of stone to keep our health and education systems near decent. That's the price we pay for keeping Mrs Lagarde happy. Because those things don't matter to her. The IMF is there to ensure debts are repaid - at all costs!

I am on record as saying this little 'pyaa-pyaa' 1% and 0.9% annual growth will never take us anywhere. We are blinding our eyes to the fact that the world is leaving us behind. We need to be growing at 6% annually for the next six years before things start to make our people as happy as Mrs Lagarde is now.

 

DEBT CANCELLATION

 

A half-decent lawyer could make a good case for these debts to be cancelled. But in the meantime, if we were to get a 20-year moratorium on these loans, during which time all our earnings would be spent on a well-constructed infrastructure, R&D, education, justice and health, we would have the wherewithal to grow our economy, pay debts and be in a position to take the matter of nation building seriously.

I would welcome stringent conditionalities to ensure our leaders behave themselves. You know what I mean.

There are those more qualified than I who have researched this subject exhaustively. Let's see what some have to say.

Respected economists Adam Przeworski and James Vreeland are just two researchers whose work qualifies them to address the subject. Using a bivariate, dynamic version of the Heckman selection model, they attempted to estimate the effect of participation in IMF programmes on economic growth. They found that: "Programme participation lowers growth rate for as long as countries remain under the programme. They grow faster than if they had remained, but not faster than they would have without participation."

 

NEW COLONIALISM

 

William Easterly's research project revealed the following: "... None of the top 20 recipients of repeated adjustment (known as structural adjustment) lending over 1980-99 were able to achieve reasonable growth and contain all policy distortions. About half of the adjustment loan recipients show severe macroeconomic distortions, regardless of cumulative adjustment loans ... ."

We are now witnessing a new form of colonisation. There is no longer any need to repeat the wasteful, bloody measures of the past. Any pain and bloodshed will be us inflicting it on ourselves - as we are now doing - with a currency so weak, our raw materials can be acquired for next to nothing. No growth keeps us perpetually dependent and voiceless.

From the beginning of time, the need to correct and adjust our operations became evident and was implemented at the appropriate times. The conventional wisdom was that - like the human body - if the accumulated toxins from our excesses are not released, serious and, possibly, terminal illness could result. Economic affairs and treatment of unpayable debt was one such area. So debt cancellation was one way of "detoxifying" societies. Here are a few examples:

- In the Book of Leviticus, God counsels Moses to forgive debts in certain cases, every jubilee year.

- The Song of Debt Release is a theme that can be found in the ancient bilingual Hittite-Huran text.

- In 6th-century Athens, a set of laws were instituted that cancel all debts and retroactively annul previous debts that had caused slavery and serfdom.

This unmanageable yoke that has been placed around the necks of Third-World countries must be lifted before any chance of meaningful growth can start. And it is not difficult. Every form of diplomatic gymnastics is being used to give us the impression that things are getting better. BS!

The developing world now spends $1.3 on debt repayment for every $1 it receives in grants. Seven million children die each year because of the debt crisis. In some 52 countries like ours, one billion people shoulder a debt burden of US$378 billion. But this is less than the total net worth of the world's 21 richest individuals. In 1999, $128 million was transferred from the poorest countries to the richest for debt repayments - every single day. Cancelling debts of these 52 countries would only cost just over one cent a day for each person in the industrialised world for 20 years. So nobody would be going to bed hungry if these debts were cancelled.

Common sense confirms what the experts have proven. As far as achieving its primary objectives - debt repayment and continued supremacy - the IMF is doing well. But this is at the expense of the health, education and prosperity of hundreds of millions of sick, starving people around the globe.

Just what did structural adjustment adjust?

- Glenn Tucker is an educator and sociologist. Email feedback to columns@gleanerjm.com and glenntucker2011@gmail.com.