issue 312 - May 1999
All of us live under the dictatorship of debt, and it grows more powerful by the day. But its rule is much more oppressive for the South than the North, for the poor than the rich. Debt in the poorest places on earth has become a modern form of slavery. Unless it is cancelled and the chains are broken, there is no prospect whatever of liberation.
MARC SCHLOSSMAN / PANOS
The debt mountain
In 1997 the foreign debts of 'developing' countries4 were more than two trillion (million million) US dollars and still growing. The result is a debt of $400 for every man, woman and child in the developing world - where average income in the very poorest countries is less than a dollar a day.
South pays North
Most of the increase in debt during the 1990s was to pay interest on existing loans. It was not used for productive investment or to tackle poverty. In six of the eight years from 1990 to 1997, developing countries paid out more in debt service (interest plus repayments) than they received in new loans - a total transfer from the poor South to the rich North of $77 billion.
In return for new loans to poor countries, lenders in the 1980s and 1990s insisted on 'structural adjustment' to increase their chances of being paid back. This meant cutting government spending on things like healthcare and education - the very services on which poor people (and women and children in particular) rely. Many of these countries have ended up spending more on servicing their debts than on the basic needs of their citizens.
The richest countries have large 'public' debts, too. But they don't have the IMF or World Bank running their governments. In the US total 'national' debt now exceeds $6 trillion (million million). That's three times the debts of all developing countries put together. The US also has an income of more than $7 trillion a year - a quarter of the world total and more than 80 times the average in low-income countries. In Belgium and Italy public debt is larger in proportion to their income than in many poor countries. The Governments of Finland and Norway are owed more than they owe.
Private goes public
The debts of the poorest 'low-income' countries are owed to Northern governments, or 'multilateral' institutions like the IMF. But this is not always because Third World governments borrowed the money in the first place. More often private debt was transformed into public debt through government guarantees and 'support' for private business. The poorer the country, the more likely it is that debt repayments are being extracted directly from people who neither contracted the loans nor received any of the money.
Credit for sale
In rich countries credit has been sold harder than any other 'product' for the past 25 years and personal debt has increased rapidly as a result. In the US from 1990 to 1998 high-interest credit-card debt rose from a third to almost a half of total personal indebtedness and now exceeds $500 billion.
* Expenditure frequently exceeds revenue, so totals may exceed 100%
** Includes health, education, social security, welfare, housing and community services
1 All figures, unless otherwise stated, are from the World Bank.
Website: http://worldbank.org or World Development Report 1998/9
2 The Economist, 2 January 1999.
3 Dollars and Sense, November/ December 1998.
4 With an average income per head of about $1,500 or less.