A new book titled Africa’s Odious Debts: How Foreign Loans and Capital Flight Bled a Continent begins its conclusion with the following. During the past four decades, sub-Saharan Africa has experienced a financial hemorrhage. We estimate that from the thirty-three countries for which we have data, capital flight between 1970 and 2008 amounted to $735 billion in 2008 currency. Including imputed interest earnings, the drain of resources amounted to $944 billion. These sums far surpass the same countries’ combined external debts, which stood at $177 billion in 2008. This means that sub-Saharan Africa is a net creditor to the rest of the world. If this is true, why are so many of Africa’s people so poor? The answer, of course, is that the subcontinent’s external assets are private and in the hands of a narrow and wealthy stratum of its population, whereas its external debts are public and therefore borne by the people as a whole through their governments. Our statistical estimates indicate that half or more of the money flowing into Africa as foreign loans exited in the same year as capital flight. Now joining us are the authors of the book: Professor Leonce Ndikumana, who teaches economics at the University of Massachusetts Amherst and is a research associate at the PERI institute, and Professor James K. Boyce, director of the Program on Development, Peace Building and Environment at PERI institute. Thank you both for joining us.
from the transcript:
PAUL JAY: So this is the beginning of what’s going to be a three-part series. In part one, we’re going to talk about the roots of this debt crisis in Africa. In the second part, we’re going to talk about the human costs of the crisis. And in the third part, we’re going to talk about solutions and just what the word “odious debt” refers to. So, Leonce, can you give us some background on what you mean by this odious debt, some of the historical roots of this debt? …
In Part 2, Léonce Ndikumana and James K. Boyce explain how the cost of servicing external odious debt leads to tragic underspending on health care and education (11:50):
from the transcript:
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington. This is the second part of our series of interviews based on the book Africa’s Odious Debts: How Foreign Loans and Capital Flight Bled a Continent. One of the things the book points out is that Africa spends more on servicing its external debt than it does on health care. …
And in Part 3, Léonce Ndikumana and James K. Boyce detail how international law supports Africa rejecting debts that did not benefit the people (18:04):
from the transcript:
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington. This is the third and final part of our series of interviews based on the book Africa’s Odious Debts: How Foreign Loans and Capital Flight Bled a Continent. In the first two parts of our interviews, we talked about the extent to which Africa’s debt was accumulated because IMF and World Bank and private banks made loans to dictators, kleptocracies, in the name of the Cold War and for the sake of the scramble for the riches of Africa, gave these loans knowing they would be, essentially, misused, not used for the benefit of the people of the countries that did the borrowing. So the question in this segment we’re asking: then why the heck should the people of these countries keep servicing these debts? And it turns out there is some international law that says maybe they shouldn’t be. …
International experts with the task of compiling a crucial review of Greece’s fiscal progress ran into trouble before they could even start the job as public-sector workers protesting against wage cuts, layoffs and higher taxes locked them out of office buildings.
Inspectors from the European Union, International Monetary Fund and European Central Bank were greeted on Thursday with banners deploring the “barbaric measures” the so-called “troika” has meted out in exchange for propping up the moribund Greek economy. At the finance ministry – the hub of talks between the debt-stricken country and creditors – protesters shouted “take your bailout and leave” and prevented auditors from entering the building.
“We are sending a loud message to the government and the European Union that we have reached our limits, that it is the workers in our country and especially workers in the public domain who have carried the burden [of cost-cutting policies],” said Costas Tsikrikas, president of Adedy, the union of civil servants.
Following the socialist government’s announcement of a new wave of austerity measures last week, the total drop in purchasing power for public-sector employees would exceed 50%, he added.
It was an embarrassing start to discussions that had been suspended in a row over missed budget targets earlier this month. The monitors’ review is critical to Greece receiving the further aid needed if it is to avert bankruptcy.
The government, in a step that highlighted lenders’ distrust of Greece over a year after it secured €110bn (£95bn) in rescue funds, had been required to outline new deficit cuts in a letter to the EU and IMF before the inspectors agreed to return. The written assurance is believed to have contained a promise that the country would push ahead with privatisations.
But the surprise sit-ins, which began with civil servants declaring that they had taken over six ministries at 7am, meant that Evangelos Venizelos, the finance minister, was forced to hold the talks on the 2012 budget elsewhere.”The measures being pursued by the government are totally counter-productive. It is obvious to everyone that they have failed … all they have achieved is the impoverishment of Greeks,” said a member of Adedy’s executive board. “These occupations are symbolic but what is not is our determination to overturn policies that have driven us into deadlock. In the last two years 300,000 small and medium-sized businesses have closed and by December we estimate there will be one and a half million unemployed. That’s one person per family.”
Unions, including Adedy, which represents more than 800,000 civil servants have vowed to step up resistance to the measures. A general strike and other protests have been planned for October.
Did you catch the “socialist government” characterization? If the Greek government was truly socialist this surrender to the IMF/EU wouldn’t be happening. This is a hardcore capitalist government.
PS. If purchasing power goes down by 50%, what do you think will happen to the economy? Hint: growth won’t begin with a positive sign.
They don’t want to work, they want to retire at 50, they want a free bailout, they want, they want, they want… I imagine Fox News is ready to light the fire. But once again, there is a problem with the narrative: It is not true. I came across a naked capitalism cross-post to a post at sturdyblog via dday at fdl and I thought I should share it.
So let me deal with some of that media Mythology.
- Greeks are lazy. This underlies much of what is said and written about the crisis, the implication presumably being that our lax Mediterranean work-ethic is at the heart of our self-inflicted downfall. And yet, OECD data among its members show that in 2008, Greeks worked on average 2120 hours a year. That is 690 hours more than the average German, 467 more than the average Brit and 356 more than the OECD average. Only Koreans work longer hours. Further, the paid leave entitlement in Greece is on average 23 days, lower than most EU countries including the UK’s minimum 28 and Germany’s whopping 30.
- Greeks retire early. The figure of 53 years old as an average retirement age is being bandied about. So much, in fact, that it is being seen as fact. The figure actually originates from a lazy comment on the NY Times website. It was then repeated by Fox News and printed on other publications. Greek civil servants have the option to retire after 17.5 years of service, but this is on half benefits. The figure of 53 is a misinformed conflation of the number of people who choose to do this (in most cases to go on to different careers) and those who stay in public service until their full entitlement becomes available. Looking at Eurostat’s data from 2005 the average age of exit from the labour force in Greece (indicated in the graph below as EL for Ellas) was 61.7; higher than Germany, France or Italy and higher than the EU27 average. Since then Greece have had to raise the minimum age of retirement twice under bail-out conditions and so this figure is likely to rise further.
- Greece is a weak economy that should never have been a part of the EU. One of the assertions frequently levelled at Greece is that its membership to the European Union was granted on emotional “cradle of democracy” grounds. This could not be further from the truth. Greece became the first associate member of the EEC outside the bloc of six founding members (Germany, France, Italy and the Benelux countries) in 1962, much before the UK. It has been a member of the EU for 30 years. It is classified by the World Bank as a “high income economy” and in 2005 boasted the 22nd highest human development and quality of life index in the world – higher than the UK, Germany or France. As late as 2009 it had the 24th highest per capita GDP according to the World Bank. Moreover, according to the University of Pennsylvania’s Centre for International Comparisons, Greece’s productivity in terms of real GDP per person per hour worked, is higher than that of France, Germany or the US and more than 20% higher than the UK’s.
- The first bail-out was designed to help Greek people, but unfortunately failed. It was not. The first bail-out was designed to stabilise and buy time for the Eurozone. It was designed to avoid another Lehman-Bros-type market shock, at a time when financial institutions were too weak to withstand it. In the words of BBC economist Stephanie Flanders: “Put it another way: Greece looks less able to repay than it did a year ago – while the system as a whole looks in better shape to withstand a default… From their perspective, buying time has worked for the eurozone. It just hasn’t been working out so well for Greece.” If the bail-out were designed to help Greece get out of debt, then France and Germany would not have insisted on future multi-billion military contracts. As Daniel Cohn-Bendit, the MEP and leader of the Green group in the European Parliament, explained: “In the past three months we have forced Greece to confirm several billion dollars in arms contracts. French frigates that the Greeks will have to buy for 2.5 billion euros. Helicopters, planes, German submarines.”
- The second bail-out is designed to help Greek people and will definitely succeed. I watched as Merkel and Sarkozy made their joint statement yesterday. It was dotted with phrases like “Markets are worried”, “Investors need reassurance” and packed with the technical language of monetarism. It sounded like a set of engineers making minor adjustments to an unmanned probe about to be launched into space. It was utterly devoid of any sense that at the centre of what was being discussed was the proposed extent of misery, poverty, pain and even death that a sovereign European partner, an entire nation was to endure. In fact most commentators agree, that this second package is designed to do exactly what the first one did: buy more time for the banks, at considerable expense to the Greek people. There is no chance of Greece ever being able to repay its debt – default is inevitable. It is simply servicing interest and will continue to do so in perpetuity.
No, not here but in Greece. The Guardian reports:
Greece is facing major disruption on Tuesday as unions begin a 48-hour general strike before a parliamentary vote on harsh austerity measures demanded in return for international rescue loans. Protest rallies in Athens are due to converge on parliament as industrial action called in protest against tax hikes was expected to disrupt or halt most public services. More than 5,000 police have been deployed to guard central Athens where anti-austerity demonstrations earlier this month ended in scenes of violence as protesters clashed with riot officers.
“We expect a dynamic and massive participation in the strike and the march to the centre of Athens. We will have 48 hours of working people, unemployed, young people in the streets,” Spyros Papaspyros, leader of public sector union ADEDY, told Reuters. Doctors, paramedics, journalists, postal workers and private sector employees were all expected to join the protest. Stoppages by Greek air traffic controllers are likely to disrupt flights and ferry departures from Athens are also expected to be hit. The unions are angry that the proposed austerity package would raise taxes on minimum wage earners and other Greeks in addition to earlier cuts that have driven unemployment past 16%.
Parliament must approve and implement the programme this week if Greece is to receive a scheduled bailout loan of €110bn from the European Union and the International Monetary Fund. Without the loan Greece risks becoming the first eurozone country to default on its debts – an event that could trigger a crisis in other economically weak European countries and have major global consequences. “These measures are a massacre for workers’ rights. It will truly be hell for the working man. The strike must bring everything to a standstill,” Thanassis Pafilis, a member of parliament for the pro-strike Greek Communist party, told Associated Press.
The fight for Europe’s future is being waged in Athens and other Greek cities to resist financial demands that are the 21st century’s version of an outright military attack. The threat of bank overlordship is not the kind of economy-killing policy that affords opportunities for heroism in armed battle, to be sure. Destructive financial policies are more like an exercise in the banality of evil – in this case, the pro-creditor assumptions of the European Central Bank (ECB), EU and IMF (egged on by the U.S. Treasury).
As Vladimir Putin pointed out some years ago, the neoliberal reforms put in Boris Yeltsin’s hands by the Harvard Boys in the 1990s caused Russia to suffer lower birth rates, shortening life spans and emigration – the greatest loss in population growth since World War II. Capital flight is another consequence of financial austerity. The ECB’s proposed “solution” to Greece’s debt problem is thus self-defeating. It only buys time for the ECB to take on yet more Greek government debt, leaving all EU taxpayers to get the bill. It is to avoid this shift of bank losses onto taxpayers that Angela Merkel in Germany has insisted that private bondholders must absorb some of the loss resulting from their bad investments.
The bankers are trying to get a windfall by using the debt hammer to achieve what warfare did in times past. They are demanding privatization of public assets (on credit, with tax deductibility for interest so as to leave more cash flow to pay the bankers). This transfer of land, public utilities and interest as financial booty and tribute to creditor economies is what makes financial austerity like war in its effect.
The Greek crowds demonstrating before Parliament in Syntagma Square are providing their counterpart to “Arab spring.” But what really can they do, short of violence – as long as the police and military side with the government that itself is siding with foreign creditors?
The most effective tactic is to demand a national referendum on whether to accept the ECB’s terms for austerity, tax increases, public spending cutbacks and selloffs. This is how Iceland’s President stopped his country’s Social Democratic leadership from committing the economy to ruinous (and legally unnecessary) payments to Gordon Brown’s Labour Party demands and those of the Dutch for the Icesave and even the Kaupthing bailouts.
The only legal basis for demanding payment of the EU’s bailout of French and German banks – and U.S. Treasury Secretary Tim Geithner’s demand that debts be sacrosanct, not the lives of citizens – is public acceptance and acquiescence in such policy. Otherwise the imposition of debt may be treated simply as an act of financial warfare.
National economies have the right to defend themselves against such aggression. The crowd’s leaders can insist that in the absence of a referendum, they intend to elect a political slate committed to outright debt annulment. Across the board, including the Greek banks as well as foreign banks, the IMF and EU central planners. International law prohibits nations from treating their own nationals differently from foreigners, so all debts in specified categories would have to be annulled to create a Clean Slate. (The German Monetary Reform of 1947 imposed by the Allied Powers was the most successful Clean Slate in modern times. Freeing the German economy from debt, it became the basis of that nation’s economic miracle.)