Who Owes Who? 50 Questions about World Debt

The huge foreign debt of developing countries has become a mechanism of domination and means of recolonization that prevents any meaningful and sustainable human development. The policies pursued by the indebted countries' governments have usually been decided by their creditors rather than by the authorities of the countries concerned. As for the initiative to lighten the debt burden, launched with much fanfare by the G7, the IMF and the World Bank under pressure from the largest ever petition in human history, it has made clear its limits. In 50 questions and answers, this book explains in a simple but precise manner how and why the debt impasse has been arrived at. Illustrated with figures, maps and tables, it details the roles of the various actors involved, the mesh in which indebted countries are caught, and the various alternatives to future indebtedness.

Damien Millet is a mathematics teacher, secretary general of The Committee for the Cancellation of Third World Debt (CADTM), a member of ATTAC, and contributor to the journal Alternative (Niger).

Eric Toussaint is a historian and political scientist, president of CADTM, member of the International Council of the World Social Forum, and of the scientific committee of ATTAC in France.

Abbreviations

viii

Introduction

ix

Maps

xi

1 The Third World in the context of globalization

1

(18)

Q1 What is meant by the Third World?

1

(4)

Q2 Are the living conditions of the poorest populations improving?

5

(7)

Q3 What are the different kinds of debt?

12

(2)

Q4 What impact does the external debt have on human development?

14

(5)

2 The origins of the developing countries' (DCs') debt

19

(8)

Q5 What were the main factors leading to the indebtedness of the DCs?

19

(2)

Q6 What is the geopolitical context of the over-indebtedness of the DCs?

21

(2)

Q7 Who were the leading actors in the indebtedness of the countries of the South, and how have the loans been used?

23

(4)

3 The debt crisis

27

(9)

Q8 How can the debt crisis be explained?

27

(3)

Q9 How has the external debt of the DCs evolved over the last thirty years?

30

(4)

Q10 How have the creditors responded to the debt crisis?

34

(2)

4 Management of the debt crisis

36

(38)

Q11 Who is the main actor in the management of the debt crisis?

36

(2)

Q12 What does the IMF do?

38

(8)

Q13 How does the World Bank operate?

46

(6)

Q14 What is the logic behind the IMF's and the World Bank's economic policy?

52

(2)

Q15 What are the short-term or shock measures imposed by structural adjustment, and what are their consequences?

54

(3)

Q16 What are the long-term or structural measures imposed by structural adjustment, and what are their consequences?

57

(9)

Q17 What is the role of the Paris Club?

66

(4)

Q18 Are all the DCs in the same boat?

70

(4)

5 Anatomy of the developing countries' debt

74

(14)

Q19 What does the external debt of the DCs consist of?

74

(1)

Q20 Who are the main creditors of the different DCs?

75

(4)

Q21 How have the roles of the different creditors evolved over the last thirty years?

79

(3)

Q22 Do the DCs repay their debts?

82

(3)

Q23 How are the debt-related financial flows managed?

85

(3)

6 Ongoing moves to reduce the debt burden

88

(20)

Q24 How did the debt-reduction initiative come about?

88

(1)

Q25 What is the Heavily Indebted Poor Countries (HIPC) initiative?

89

(5)

Q26 What are the results of the HIPC initiative?

94

(2)

Q27 What are the limitations of the HIPC initiative?

96

(6)

Q28 What is the New Partnership for African Development (NEPAD)?

102

(3)

Q29 What are vulture-funds?

105

(3)

7 Debt cancellation and suspensions of payment in the past

108

(9)

Q30 Have there ever been debt cancellations in the past?

108

(6)

Q31 Why do the governments of the South continue to repay the debt?

114

(3)

8 The case for cancelling the DCs' debts

117

(21)

Q32 Will debt cancellation be enough to ensure the development of the DCs?

117

(1)

Q33 What are the moral arguments in favour of cancelling the DCs' debts?

118

(2)

Q34 What are the political arguments in favour of cancelling the DCs' debts?

120

(2)

Q35 What are the economic arguments in favour of cancelling the DCs' debts?

122

(2)

Q36 What are the legal arguments in favour of cancelling the DCs' debts?

124

(3)

Q37 What are the environmental arguments in favour of cancelling the DCs' debts?

127

(3)

Q38 What are the religious arguments in favour of cancelling the DCs' debts?

130

(3)

Q39 Who owes what to whom?

133

(2)

Q40 Should there be conditions attached to debt cancellation?

135

(3)

9 Issues raised by debt cancellation

138

(26)

Q41 If the creditors decided to cancel the debt, would it cause a global financial crisis?

138

(5)

Q42 Could cancelling the debt cause an impoverishment of the North, particularly for tax-payers?

143

(3)

Q43 How can alternative funding be found for the development of the DCs?

146

(5)

Q44 Won't the dictatorial regimes currently in office benefit most from debt cancellation?

151

(3)

Q45 If and when the debt is cancelled, how can a new round of indebtedness be avoided?

154

(1)

Q46 Should recourse to borrowing be avoided at all costs?

155

(1)

Q47 Can the DCs' external public debt be compared to the public debt of the North?

156

(3)

Q48 How can we achieve cancellation of the DCs' debt and a general improvement of the human condition?

159

(5)

10 The international campaign for debt cancellation

164

(5)

Q49 How did the international campaign for the cancellation of the debt start?

164

(2)

Q50 How was the CADTM founded?

166

(3)

Appendix: Lists of countries

169

(2)

Glossary

171

(11)

Bibliography

182

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Who Owes Who? 50 Questions about World Debt

Summary

Author Biography

Table of Contents

Supplemental Materials