4 November by CADTM International
Since the beginning of the year 2020, the Covid-19 pandemic has tragically worsened the living conditions of the majority of the world’s population. Never really recovering from the subprime crisis in 2007-2008, the economic system is disintegrating as it continues to distance itself from the real economy.
Already in 2018, the former IMF Managing Director Christine Lagarde stated that “debt levels have reached new highs in advanced, emerging, and low-income countries … global debt—both public and private—has reached an all-time high of $182 trillion—almost 60 percent higher than in 2007 … Emerging and developing economies are already feeling the pinch.”
Two years later, under the impact of the brutal slowdown of the global economy, as sick as fragile, the situation has reached unprecedented levels. In the countries of the North, the overall level of public debt has exceeded 120% of GDP. In the South, more than one in five is in a situation of over-indebtedness and nearly 15% are in partial or total default. According to the ILO, nearly 300 million formal jobs have been destroyed in the space of a few months in these regions. According to the World Bank, by the end of 2020, as a direct impact of Covid-19, extreme poverty will affect between 88 and 115 million additional people and will plunge nearly 270 million more people into a situation of acute food insecurity.
In spite of the urgency of the situation, the appeals for help from the populations, from some Heads of State and the coordinated mobilization of civil society organizations, the IFIs and the international institutions are not on the same page. The measures taken in the spring and fall by the IMF, the World Bank and the G20 can once again be summarized as follows: “too little, too late”. “Too little” in terms of the number of countries concerned (barely 50% of DCs), without any debt cancellation and without any effort on the part of private creditors; and “too late”, for a majority of the countries concerned. The measures announced in April were not applied until August/September. As a result, Zambia appears to be only the first in a long list of countries to declare default in the coming weeks.
Nearly four decades since the begining of the last major Third World debt crisis, we are heading towards another humanitarian catastrophe. The IFIs and international institutions do not want to abandon the policies that led to this extremely serious situation. Worse, the IMF, as always, is conditioning its intervention on the application of structural adjustment plans, in accordance with its historical anti-social, pro-neoliberal action. Despite its harmful impact on the living conditions of 85% of the world’s population, the US$3 trillion external public debt of the countries of the South is a much smaller sum as compared to the US$5 trillion released in the United States and Europe alone, and compared to the total global debt. In short, with political will, the total cancellation of the debt of developing countries is possible.
Since official and private creditors are only willing to act in the general interest, we call on the countries of the South to exercise their right and to suspend the payment of their debt by invoking three arguments that are so pertinent and legitimate at this point of time: the “fundamental change of circumstances” since the beginning of the global pandemic, the “state of necessity” due to the unavaoidable additional health and social spending in a context of economic crisis, and “force majeure” given the situation of over-indebtedness in which they find themselves. To protect themselves from the reprisals already taken by private creditors, we call on the countries of the South to form a united front against the payment and repudiation of these illegitimate debts.
Moreover, the pandemic is affecting an ever-increasing part of the population and the containment measures are aggravating unemployment, diminishing incomes, precariousness, rising prices of food and basic services. Massive layoffs of employees and the bankruptcy of small enterprises and other small subsistence activities are becoming widespread. The majority of working class households now have great difficulties to meet their basic needs while their health expenses increase due to Covid-19 in the context of a dismantled public health system due to decades of neo-liberal policies favouring private sector since 1980. Today, hundreds of millions of over-indebted working class people, many of whom are women, find themselves unable to repay their loans and suffer under very high interest rates imposed by microfinance (microcredit) institutions as well as consumer credit institutions and banks. This over-indebtedness also concerns peasants and farmers forced to carry out intensive and destructive farming by massive investment in machinery and fossil inputs; mainly women who are unable to repay micro-credits; tenants unable to pay high rents due to pure real estate speculation; students whose professional and personal future is sacrificed in order to repay loans contrary to human rights; or all those who are forced to resort to consumer credit to meet basic necessities under conditions of increasingly aggressive neoliberalization that benefits only the wealthiest.
The social tragedies of the broad social strata that result from their banking debt while a minority of speculators in the financial sector become richer, make these private debts illegitimate. They are also illegal because of contractual defects.
We call for a citizen and social mobilization (individuals, associations, organizations, autonomous movements, networks…) to probe the different forms of looting and abuses committed by microcredit institutions, consumer credit institutions and banks against their victims, and to scrutinize the illegitimate and illegal foundations that require the cancellation of the private debts of poor households.
This necessary mobilization for the cancellation of illegitimate private debts will be a component of a global movement for the cancellation of illegitimate public debts.