Monday, September 27, 2004

Brown and Third World Debt

On Sunday, Gordon Brown pledged that Britain would write off its share of the debts owed by third world countries to the World Bank. This is to be welcomed - and lets hope that other countries follow suit (as I understand Canada is planning to do).

However, we should not get carried away in our praise for Brown's generosity here. For one thing, as the World Development Movement point out Brown is not writing off all of the UK's share of third world debt - only those owed to the World Bank. It does not cover IMF debts amongst others. Moreover, the cold grip of neo-liberal theology has not been loosened. War on Want report that 'The UK government is giving away millions of pounds from the UK aid budget to privatisation consultants engaged to ‘advise’ developing countries on handing over their public services to the private sector'. As John Hilary from War on Want says '"[t]here is a solid body of evidence showing that privatisation of public services increases poverty in developing countries."' Brown's moves to write off debt then represent a step in the right direction - but a very small step.

It would take an awful lot of persuading to make the 'left-leaning' Brown admit that neo-liberalism, enforced privatisation and 'structural adjustment' is immensely damaging to millions of lives (talk about global terrorism!) - that would really be a victory - but, of course, in reality, the causes of third world poverty are embedded within the structures of the global economic system at a much deeper level even than this. While Labourist social democrats might be forced to concede that neo-liberal economics cause misery, they could never admit that the responsibility for third world poverty lies with capitalism itself.

There are two excellent pieces of work covering the historical roots of third world poverty. I highly recommend them both. Giovanni Arrighi contributed an essay on 'The African Crisis' to New Left Review in 2002. You can see this article on-line here. Arrighi concentrates, for the most part on post-1975 changes in the world economy and its effects on sub-saharan Africa. He explains the radical descent into economic disaster and starvation in the late 70s and 80s in the context of the world crisis of capitalism which set in after rates of profit began to drop in the 1970s after the 'golden age' of post-war Keynesian growth. In addition to a crisis in terms of profit rates, the world hegemonic power, the US, was also suffering from a (connected) crisis of legitimacy in terms of its hegemonic status. The US had suffered disastrous defeat in Vietnam and also lost face when the Shah was overthrown in Iran. In addition there was growing crisis of confidence in the Dollar. Arrighi explains that the US responded to these crises in a number of ways including (crucially in terms of third world debt) ' resorting to economic policies—a drastic contraction in money supply, higher interest rates, lower taxes for the wealthy, and virtually unrestricted freedom of action for capitalist enterprise—that liquidated not just the legacy of the domestic New Deal but also, and especially, the Fair Deal for poor countries ostensibly launched by Truman in 1949.Through this battery of policies, the US government started to compete aggressively for capital worldwide, to finance a growing trade and current account deficit in its own balance of payments; thereby provoking a sharp increase in real interest rates worldwide—and a major reversal in the direction of global capital flows'. Arrighi shows that this deliberately engineered hike in interest rates lead directly to the African famines we all remember from the 1980s.

The second thing I recommend here is Mike Davis's 'Late Victorian Holocausts' (Verso, 2001). In this Davis sets out the 'hidden history' of the Victorian era - the massive famines that swept through third world countries in the age of colonialism and imperialism. Davis shows that it was the integration of (what are now) third world economies into the global capitalist system that lead to the almost unimaginable death tolls which he sets out - death tolls he points out which are virtually unrecorded in most mainstream historical accounts of the Victorian era (the victors of course, write history - we hear of the dreadful famines that ravaged Mao's China for example, but little about the capitalist famines). The brutal opening up of Indian, South American etc markets and their integration into the world system of liberal capitalism by imperial powers had devastating consequences. Davis tells us that in India, for example, 'there were 31 serious famines in 120 years of British rule and only seventeen recorded famines in the entire previous two millenia' (Davis, 2002, 287). Davis points out that today's third world poverty can be traced back to the effects of Victorian imperialism.

What to do then? Brown's reforms should be welcomed and indeed any measures that will lead to the relief of poverty must be supported. But, if, as Davis and Arrighi claim, the roots of third world poverty are firmly embedded within the workings of capitalism then reforms, of course, can never be enough. Only the abolition of capitalism and the genuine socialist transformation of the world economy can provide an adequate solution. But we already knew that.

<< Home

This page is powered by Blogger. Isn't yours?