New Internationalist

On The Slide

Issue 151

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[image, unknown] HOW TO FEED THE WORLD
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7 Stop using money against the poor

On the slide
Jamaica is not one of the world’s poorest countries.
Nor is Erna one of its poorest inhabitants. But,
as Belinda Coote argues, the debt crisis and the monetarist
policies on which the West insists are dragging them both down.

WHEN I first met Erna she was building a road block. She and her neighbours were struggling to wedge an empty oil drum in place with rocks, planks of wood, broken furniture and bags of rubbish. It was little more than a gesture, perhaps, for access to their street had already been blocked by an overturned metropolitan bus, still smoldering from the fire that had destroyed it. ‘When they shift that bus they’ve still got us to deal with.’ she remarked grimly.

It was January 15 1985 the day the Prime Minister of Jamaica, Edward Seaga. announced that the prices of petrol, diesel oil and kerosene would increase by 20 per cent. Erna was just one of the thousands of Jamaicans who reached the limits of their endurance and took to the street in protest. ‘I’ve never been a member of any political party, and probably never will be, but this government is too much. We’ve had enough.’ she explained as we retreated out of the midday sun onto her veranda.

Erna’s street is typical of many that you find in downtown Kingston. Rows of detached, one-storey, concrete houses constructed in the wake of a hurricane that destroyed much of Kingston in the 1950s. It was probably designed as a middle-class suburb; located a respectable distance from the centre of town, complete with tree-lined streets, gardens, neighbourhood schools and grocery stores. A far cry and a safe distance from the ghettoes. But now the paved road is pitted with pot holes, paint peels from window frames and broken fencing rings the houses. Deteriorating economic conditions have turned it into part of Kingston’s sprawling and decaying inner-city area, and a ghetto in its own right.

Erna lives in one of these houses. She and her two children share one room that serves as bedroom, living room and kitchen. It’s spotlessly clean but dimly lit and poorly ventilated as the window faces directly onto the wall of the house next door. She apologises for the state of the bathroom, situated at the back of the house, which had no light, no water and no door, and for the rats that scuttle across the dirt floor.

Her landlord and his family live in the other part of the house. They had turned their front room into a small grocery shop. But business is bad. The large fridge for storing cold drinks stands empty and idle in the corner, the electricity supply having been cut off several months previously, and the shelves are nearly empty of goods.

Erna is an ancillary worker in one of Kingston’s public hospitals. She counts herself lucky to be employed at a time when 30 per cent of the workforce are jobless, but she fears redundancy. The government recently announced that they would be laying off 1,500 workers in the health sector as part of their plans to cut back on public expenditure. ‘If somebody leaves they don’t get replaced these days and yet we are already overworked. The hospital is dirty, crowded and short of basic items such as cleaning materials. I’m just waiting for them to say "Erna, we don’t need you any more’, and then I don’t know what I shall do.’

She is finding it increasingly difficult to live off her wages of J$60 (nine US$) a week. In the last year food prices have risen dramatically. ‘I remember when you paid 60 cents for a pound of rice. Today it costs J$l.50. But that’s not all. We used to be able to eat chicken necks, pork or salt fish each day. But now we are lucky if we can afford them once a week. Everything just keeps going up and up... except our wages. She pays J$5 a week rent and most of the rest of her income goes on food for her two children. It’s been nearly a year since she could afford electricity - it has quadrupled in price in that year - and even longer since she bought any new clothes. She worries that her children are suffering from the poor diet they are forced to live on. These latest price increases mean that Erna will have even more difficulty making ends meet. Like many people in Jamaica she cooks on a kerosene stove so she will either have to pay more, or cook less.

When Seaga announced the price rises he explained in a statement to Parliament that they were ‘an inevitable outcome of the devaluation of the Jamaican dollar in relation to the US dollar ... this has the effect of increasing prices in both food and fuel, which is the reason for the pain we all feel.’ But this explanation was little comfort to Erna. Pain is, indeed, what she and thousands of other Jamaicans are feeling, as a direct result of their government’s attempts to pay off the money it owes to the international banks. And they’ve had enough.

In common with most developing countries. Jamaica’s economy suffered considerably when the price of oil was increased in the 1970s and it had to turn to the Western banks for loans. The country’s external debt is now estimated to be more than US$3 billion and since 1977,because of its balance of payments deficits, it has turned to the International Monetary Fund (IMF) for loans. When the IMF acts as watchdog over any country’s economic affairs it demands that an adjustment or ‘austerity’ programme be implemented. This involves devaluation of the currency (to discourage imports and encourage exports); reductions in government spending; increases in prices charged by public services (such as transport, water, electricity); abolition of price controls and subsidies; wage restraints and high interest rates to reduce inflation.

The IMF’s programme has had a devastating effect on thousands of Jamaicans. In the last year food prices have risen more than 60 per cent. Unemployment is expected to rise to 50 per cent by the end of the year whilst wages remain pitifully low and are falling in real terms. Cuts in government expenditure mean rapidly declining standards in the public sector, such as health and education services. And according to the Voluntary Organisation for the Upliftment of Children, 28 per cent of children are suffering from malnutrition because their parents can no longer afford to buy enough food.

Whilst Erna just about manages to survive on her inadequate income she knows that things could get a great deal worse. If she is made redundant, she and her children will join the growing ranks of those who have already been forced onto the streets to beg for food.

The IMF would not deny that their draconian adjustment policies cause hardship but would justify them as being essential for future financial health. Yet Jamaica has been under the surveillance of the IMF for eight years and there is no sign of economic recovery. Clearly the medicine is not working. One reason for this is that poor countries have no control over many factors which affect their balance of payments. They include international inflation, which has boosted the price of imports; high interest rates on loans which have massively increased the cost of debt servicing; and weak world market prices for commodity exports.

This year more than half Jamaica’s export earnings will be spent on servicing its external debt. Revenue from the bauxite industry, which is the mainstay of the economy, has halved due to an international slump and rising production costs. World market prices for sugar, the main export, are at an all-time low due to over-production of sugar beet by the EEC and competition from alternative sweeteners. The situation would be even worse were it not for the earnings of the tourist industry.

The Jamaican economy is contracting, employment opportunities shrinking, investment is negligible and growth a thing of the past. The austerity measures imposed are resulting in an alarming escalation of poverty and widespread discontent, as demonstrated by the January protests.

The policies being pursued by the IMF and the Jamaican Government are actively working against greater social equality, fairer income distribution and better access to basic services such as education and health care. Erna’s present circumstances and the grim future that she and other Jamaicans face, are not necessary steps towards economic recovery, as the IMF would have us believe, but actually militate against long-term development and sustained economic growth.

Belinda Coote works for Oxfam UK’S Public Affairs Unit and is the
author of their report
Debt and Poverty: A Case Study of Jamaica.

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Stop using money
against the poor

The problem
Money is used against the poor in many different ways. But the most telling weapon at the moment is debt The oil crisis of 1972 hit the North hard - but it hit the Southern countries even harder, forcing them to borrow huge amounts to survive. The servicing of these debts is crippling enough on its own - in 1985 Jamaica's repayments will consume more than half the foreign exchange it earns from exports. But what makes things worse is that any new loan taken out to pay the interest on old debts necessitates satisfying the demands of the International Monetary Fund (IMF) for monetarist policies. These policies involve drastic cuts in public spending - and welfare programmes and food subsidies are always the first to be hit The suffering this causes the poor has no justification - no economy has yet benefitted from the monetarist medicine.

The facts
. The total debt of developing countries in 1984 stood at $686 billion. (World Bank, World Development Report 1985)

. In 1976 Citibank of the US derived 13% of its worldwide earnings from Brazil’s debt repayments alone. (The Moneylenders by Anthony Sampson)

. In 1983 developing countries paid the Western banks 21 billion dollars in debt servicing - seven billion more than theywere able to borrow that year. (Statement by A. W Clausen , President of the World Bank)

. Debt repayment as percentage of export earnings 1983

1. Costa Rica 50.6
2 Morocco 38.2
3 Mexico 35.9
4. Burma 33.8
5. Algeria 33.1
6. Ecuador 32.5
7. Zimbabwe 31.6
8. Ivory Coast 31.0
9. Bolivia 30.5
10. Turkey 28.9

The way forward
At the very least the debt of the world’s poorest continent Africa, should be written off - this represents a modest five per cent of the total owed. No country should be expected to pay more than ten per cent of its export earnings. Indebted nations must stand together and use the threat of default to win better repayment terms and the removal of the IMF from its role as an economic police force.


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