Imagine two scenes in two different parts of the world.
In the first scenario, three hooded gunmen raid an embassy. After a bloody gun battle, the terrorists take the Ambassador and other survivors as hostages. They demand the release of certain prisoners, or they will destroy the embassy and kill their hostages.
In the second scenario, three grey-suited executives raid a country. The collapsing economy has left the government powerless to administer essential services. Failed crops, internal corruption, and natural disasters have taken their toll. People are desperate and dying. The IMF and World Bank executives outline the terms and conditions of a $10 billion loan.
The terrorists in the first scene are eventually captured and executed for terrorist crimes. The bankers in the second scene are rewarded for their successful hijacking of the country’s economy. Their corporations will be paid many times the loan over the next decade. The debt trap will cripple and imprison the country’s future earning capacity. The executives receive bonuses and promotions that take their collective salary to a sum greater than the salaries of all the lowest paid workers in the country they had signed up to the trap.
Over the past sixty years, the IMF and the World Bank have forced economic ‘development’ that benefits the wealthy lenders and multinational corporations in the industrialized north and enslaves the world’s poor majority in developing and third world countries. These international loan sharks have hijacked the economies of more than 100 countries. Loans, international assistance, and debt relief are given only when countries agree to conditions set by the Bank and the Fund. Free trade, market liberalization, and privatization of essential resources and services are demanded if ‘financial stability’ is to be achieved. While crippling interest payments force cuts in health care, education and other social services for millions of people around the globe; the banks and corporations that ‘rescued’ those countries report record profits. Humanitarian crises, like wars, have become lucrative business for those who have money to lend.
Twenty years back, economist J. W. Smith warned, “The size of the debt trap can be controlled to claim all surplus production of a society, but if allowed to continue to grow the magic of compound interest dictates it is unsustainable. The third world debt had been compounding at over 20 percent per year between 1973 and 1993, from $100 billion to 1.5 trillion [only $400 billion of the $1.5 trillion was actually borrowed money. The rest was runaway compound interest]. If Third World debt continues to compound at 20 percent per year, the $117 trillion debt will be reached in eighteen years and the $13.78 quadrillion debt in thirty-four years.” We are getting there. Fast.
The debt trap robs all the surplus production of an entire society and forces a country to work for nothing. This form of terrorism punishes the children, abandons the sick, and enslaves the adults. Every hour, one Filipino child dies because of debt-related poverty. Millions of children die every year in the Third World because they are too poor to buy food or medicines. Their families work extraordinary hours to earn less than $2 a day. Filthy slums with inhumane living conditions are prolific in most countries in the third world.
An estimated 150 million children live and work on the streets in the developing world, including 50 million in Latin America. Although many of these street children have some family links, they spend most of their lives on the streets begging, selling trinkets, shining shoes or washing cars to supplement their families’ income. These children rarely go beyond a fourth-grade education. 25 million children without families live in the streets with other street children. They sleep in abandoned buildings, under bridges, in doorways, or in public parks.
In these extra ordinary times, those of us who live in the luckier countries relish our wealth by consuming goods manufactured in third world countries by slaves, many of them children. Essentially, these children are worse off than slaves of past centuries who were at least housed, fed and clothed. Despite internationally agreed convention of rights for the child, approx. one billion children lack basic human needs in South Asia, Africa, Vietnam, Palestine, Iraq and Afghanistan. The UN estimated that nearly 3.5 million children died as a result of armed conflict in the last two decades alone.
Africa has been the worst sufferer in recent years. In the early 1980s, one in ten of the world’s poorest lived in Africa; now the figure is about one in three. It gets worse. Anything extra our third-world worker can earn will go into debt service payments. The banks profit, and the shareholders increase their wealth. Sub-Saharan Africa pays close to $30 billion every year in debt service. These countries are experiencing a pandemic with terrible consequences. In South Africa one in five people has HIV-AIDS, and in Zimbabwe one in four. One in seven Kenyans has the virus. In Botswana, the country with the highest rate of infection in the world, more than one-third of all adults are HIV positive. Twenty million people, or the entire population of Australia, have died in Sub-Saharan Africa since the pandemic began.
Despite their extreme health crisis, 23 African countries spend more money on debt repayment than they spend on healthcare, which attracts only $2.5 billion, or a quarter of their debt service. This does not concern the banks that loaned the money. Their only objective is to make their rich owners even richer. The Kenyan widow dying of aids and leaving five orphans is not entered into the ledger books. However, the profits made by selling GM food that the starving widow and her children are forced to eat is entered into the ledger books. The humanitarian crisis has created a market for modified food that the rest of the world didn’t want. After all, beggars can’t be choosers.
After the G8 summit in Okinawa in 2000, President Obasanjo of Nigeria made this comment on Nigeria’s debt: “All that we had borrowed up to 1985 or 1986 was around $5 billion and we have paid back about $16 billion yet we are still being told that we owe about $28 billion. That $28 billion came about because of the injustice in the foreign creditors’ interest rates. If you ask me what is the worst thing in the world, I will say it is compound interest.” When President Obasanjo spoke out, the developing world was spending $13 on debt repayment for every one dollar it received in grants. Under these circumstances, depression is becoming as common as cold. Millions of people are now compelled to pay a handsome price to pharmaceutical MNCs to buy “artificial happiness”.
By contrast, the wealthiest individuals in the world can choose or buy anything they want. At the top of the list is Mexican billionaire Carlos Slim whose current net worth of 75 billion dollars, is more than 8 times the annual debt service of sub-Saharan Africa and 20 times the annual expenditure on health and education in those countries. The world’s 1426 billionaires in 2013 registered a combined wealth of $5.4 trillion, well over the combined GDP of all the nations of sub-Saharan Africa ($1.2 trillion) or those of the oil-rich regions of the Middle East and North Africa ($1.34 trillion). These less than 1500 people also possess greater wealth than the combined income of the poorest half of humanity!
Think about that fact for just a minute. 1500 obnoxiously wealthy people have too much while nearly four billion people have nothing. Please allow the full meaning to play out in your mind. While 1500 hundred people have enough money to buy several countries, over 1.1 billion individuals live on less than one dollar a day and half of humanity or 2.7 billion people (up from 2.4 billion 20 years back) struggle to earn less than $2 a day and can barely buy enough food to stay alive. The five hundred at the top of the tree just make a profit out of poverty. MNCs pay their top executives more in annual bonuses than their lowest paid workers earn in a lifetime. While half of humanity struggles to survive every day, the wealthier half spends annually US$92 billion on junk food, US$66 billion on cosmetics and US$40 billion per month on wars that further devastate impoverished countries with crippled economies. A survey by Merrill Lynch revealed that 7.7 million high net worth individuals (whose financial assets are over US$1 million excluding homes and real estate) have a combined wealth of US$30 trillion.
Conversely, the geographical distribution of an ocean of poverty is also worth noting. Of the poorest 1.1 billion, over 400 million live in South Asia; about 320 million in Sub-Saharan Africa, 270 million in East Asia and the remaining 110 million in the rest of the world. Interestingly, World Bank assumes that NOT-A-SINGLE-INDIVIDUAL in the developed world lives below US$ one a day.
A number of other statistics can be generated from world income distribution. These are some examples: the richest 1% people in the world receive as much as the bottom 57%, or in other words, less than 50 million of the income-richest people receive as much as 2.7 billion poor people. An American having the average income of the bottom 10% is better off than two-thirds of the worlds population. The top 10% of the US population has an aggregate income equal to the income of the poorest 43% of people in the world. Put differently, the total income of the richest 30 million Americans is equal to the total income of almost 2 billion poor people. Even among Americans, the divide between the rich and poor is huge. The richest one percent possess more wealth than the bottom 95 percent.
Back home, Indian government grossly misled through “India is Shining” campaign and the so-called “feel good factor”. There is a big propaganda about our forex reserves. This is a mere statistical illusion, not an economic reality. India is the 9th most indebted country in the world having external debt of over US$ 390 billion. That means every Indian is born with a debt of US$ 317 or Rs. 20,600 on his shoulders. This excludes internal debt, which the federal and state governments borrow from the Indian public and cash-rich business houses in the bank market. Current estimates of people with HIV vary widely – UNAIDS puts it at 4.6 million. Sadly, there is on an average only one trained doctor to treat every 5,000 HIV patients in the country.
Who is Funding the Debt ?
While most people would be aware of the debt burden of the third world, they would be surprised to learn that the United States is the most indebted country. The accumulated debt of the world’s ‘richest’ country is growing rapidly. It currently stands at $16.737 trillion. It means each American is in debt of $52,170!
The exact amount owed by the BRIC nations (Brazil, Russia, India, and China) is $6 trillion. This means that 300 million Americans owe much more to the rest of the world as do about 3 billion people in the BRIC countries. Such heavy indebtedness of US, says Allen Sinai of DecisionEconomics, a US based consulting firm, “is a time-bomb issue”.
If the money is not coming from the United States, where is it coming from? Who actually owns the money that was loaned in the first place? Some of it comes from illegal activities and is recognized as ‘dirty money’. US and European banks launder between $500 billion and $1 trillion of dirty money each year, half of which enters the coffers of American banks. Some top European banks have recently admitted to this crime and got away with “fines” to the US authorities. Because they are not BCCIs, they are still open for business!
According to Catherine Austin Fitts, a contributing editor to ‘From the Wilderness’, and formerly Assistant Secretary of Housing under George Bush senior, the four largest states for the importation of drugs are New York, Florida, Texas and California. She points out that the top four money-laundering states in the U.S. (good for between US$100 and 260 billion per year in 1999) were New York, Florida, Texas and California. The connection goes on. Eighty per cent of all Presidential campaign funds also come from New York, Florida, Texas and California. While creditors abroad financed about a third of the year’s borrowing, roughly 5 per cent of the America’s total output of products and services.
A vast majority of foreign exchange reserves shown in the balance sheets of nations land up in US coffers. While the world saves, Americans spend their money freely. Today, to keep the US consumption going, that is for the US economy to work, other countries have to remit to America US$180 billion every quarter or US$2 billion per day!!! A Chinese economist asked a neat question recently: Who has invested more, US in China or China in US? The US has invested in China less than half of what China has invested in US. China has sunk over US$160 billion in US securities. Japan’s stakes in US securities is in trillions. The gross US investment in Indian economy is only US$20 billion, while this poor, third world country keeps its foreign currency assets of over US$50 billion in US securities like treasury bills.
Is US Alone in this Game ?
The World Bank and IMF are the main targets of activists working to remove and eliminate third world debt, but these two international banking institutions are influenced by various banks, financial consultancies, and former politicians who manage the wealth of the world for their wealthy clients. The ‘Group of Thirty’ established in 1978 is a private, nonprofit, international body composed of very senior representatives of the financial, private, public and academic sectors. This select group of controllers aims “to deepen understanding of international economic and financial issues and to examine the choices available to market practitioners and policymakers”. The most powerful decision-makers and influencers in the financial world are members of this magic circle, which includes major banks, universities, former politicians, and global consultancies.
Despite the impressive collection of financial wizardry and power, The Group of Thirty and annual Economic Summits have failed to neutralize the terrorism of third world debt. Those who manage the global economic system are focused on the shareholder value of banks and corporations. The system is ‘successful’ as long as it returns more wealth to the wealthy. Yet these financial experts are myopic about the future. The current level of debt worldwide is unsustainable and must eventually lead to the total collapse of a global economy that expects increased productivity from the poorest and unhealthiest workers on the planet. The horrific example of a Bangladeshi garment factory is fresh in our memory.
The Universal Declaration of Human Rights, adopted by the United Nations General Assembly in 1948, is built on the principle that human rights come from the ‘inherent dignity’ of every person. The Declaration states, “Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.”
When the United Nations wrote that declaration 65 years ago, mankind was recovering from the trauma of a world war and the horrifying genocide of millions of innocent civilians. At that time it was necessary to ratify basic human rights and the principle of human dignity. The genocides happening in the third world today are more horrifying than the death camps in Nazi Germany. This time the objective is not to ‘cleanse the master race’, but to make the masters wealthier and stronger.
The banks, in pursuit of more wealth and power, terrorize the third world. But many of us who live comfortable lives in rich countries are part of the crime. Our lifestyle, and our expectation that our savings must grow, feed the terrorism of debt. We might save a few dollars with the cheap imported clothes we wear, the coffee we drink, and the oil we put into the car; but those savings have made slaves of children and ignited wars. Our humanity has been hijacked by the US$ and the pursuit of wealth has become more important than human lives. Unemployment is increasing world-wide, when at least one billion jobs need to be created globally over the next 10 years to absorb new workers and to reach the UN’s objective of halving extreme poverty by 2015.
Can we do something ?
This piece is not meant to simply educate the audience, but to encourage the will of ordinary people to prevail over the greed of a few power-hungry politicians and bankers. How then do we wage a war on ‘debt terrorism’? Eleven actions are suggested that may democratize the global economy and make the world a better place to live. These are not easy or quick-fixes and each action will require dedication and persistence. The following may be a starting point:
1. The WTO must be replaced by a body that is fully democratic, transparent, and accountable to citizens of the entire world instead of to large corporations.
2. Mandate corporate responsibility so that corporations have to prove their worth to society or be dismantled. Corporations must be accountable to public needs, be open to public scrutiny, provide living wage jobs, abide by all environmental and labor regulations, and be subject to all laws governing them. Shareholder activism is an excellent tool for challenging corporate behavior.
3. Restructure the Global Financial Architecture. Currency speculation earns short term profits for wealthy investors but does nothing for long term development. A tax of even 1% on currency transactions would be a disincentive for speculation, would not affect real capital investment, and could create a huge fund for building schools and medical clinics throughout the “third” world.
4. Support the Jubilee action to cancel all third world debt, end structural adjustment, and defend a country’s right to make economic decisions that will benefit the welfare of its people, not MNCs.
5. Prioritize human rights in trade agreements. Trade rules must comply with laws on human rights as well as economic and labor rights included in the United Nations Declaration of Human Rights. We should promote alternative trade agreements including fair trade, debt cancellation, micro-credit, & local control over development policies.
6. Promote sustainable development, not consumption, as the key to the progress. International development should not be export-driven, but rather should prioritize food security, sustainability, and democratic participation.
7. A just system should form the basis of economic structuring. Economic policies need to take into account women’s important role in nutrition, education, & ethical development.
8. Build free and strong labor unions internationally and domestically. The union movement needs to be reborn. As corporations increase their multinational strength, unions are struggling to build bridges across borders and organize globally. Activists can support their efforts and ensure that ‘free labor’ is an essential component of any ‘free trade’ agreements.
9. Develop community control over capital and promote socially responsible investments. Communities should be able to implement investment and development programs that suit local needs.
10. Promote fair trade instead of free trade. We need to build networks of support and education for grassroots trade for wider distribution of wealth, and trade in environmentally sustainable goods. We can promote labeling of goods such as Fair Trade Certified, Organic, and sustainably harvested.
11. During the 20th century, various governments murdered over 170 million people. This excludes lives of armed combatants taken in war theatres. If we disarm every nation and cease all military operations, the money saved in the FIRST MONTH would shelter, feed, clothe and educate every child in this world.
The rich must live more simply, so that poor may simply live. We are living in a shameless world where food is given as a reward or withheld as punishment. Poor Afghans, poor Americans, poor Iraqis, poor Indians, poor Africans, poor Palestinians, poor Hindus, poor Christians and poor Muslims have more in common with each other. They form the base of a pyramid, and we can help turn that pyramid upside down.
There is hope. Many of us are campaigning to transform the new world order into a new humanity. Millions of ordinary people marched in anti-war protests in almost every major city in the world during the run-up to the illegal invasion of Iraq. The same is happening against the impending attack on Syria. The crisis created by third world debt has also made us aware of the stranglehold that organizations like the IMF, World Bank, US Treasury and the Bank of England have on the world.
Most of us want to live peacefully with others, to enjoy freedom and to feel love, respect and dignity. Our challenge now is to learn to live in communities, to honor and work with our environment, to reject the prejudice of national pride and to welcome the birth of an international community where sharing resource replaces monopolizing resources.
It is time to reclaim our humanity and to ‘equalize’ the economy so that we can fairly run, not unfairly ruin, our world. Economic theories or statistics will not feed, clothe or shelter us when we have used up the last poor worker. The current system is doomed to fail and will cost more millions of lives. If we start now, our grandchildren will be able to enjoy a world where human dignity is the most valued currency.
Let’s begin to work on a new world order NOW.
The US$ : America’s WMD
Image Source : By Dwindrim at en.wikipedia. This was a modification of original, taken, and uploaded by Joedjemal [GFDL or CC-BY-SA-3.0], from Wikimedia Commons, By YGLvoices (Flickr) [CC-BY-SA-3.0], via Wikimedia Commons, Pulitzer Centre