Monkeyfist.com
Noam Chomsky On IMF/WB Debt Forgiveness
by Kendall CLARK
Monday, 17 April 2000
.....
The question:
What do you say to the argument that the countries who borrowed from the
WB/IMF have no right to ask for debt forgiveness (nor should anyone ask on
their behalf) and should be held responsible for their debts like you or anyone
else would? And to what extent is the first world responsible for the debt crisis?
Chomsky responds:
The simplest answer to the argument that countries who borrowed from the
WB/IMF have no right to ask for debt forgiveness is that the presupposition is
false, so the argument is vacuous. E.g., the "country" of Indonesia didn't borrow;
it's US-backed rulers did. The debt, which is huge, is held by about 200 people
(probably less), the dictator's family and their cronies. So those people have no
right to ask for debt forgiveness -- and in fact, don't have to. Their wealth (much
of it in Western banks) probably suffices to cover the debt, and more.
Of course, this response assumes the capitalist principle. According to this
principle, if I borrow money from you, use it to by a Mercedes and a mansion,
and send most of the money to a bank in Zurich, and then you come and ask me
to repay the loan, I'm not supposed to be able to say: "Sorry, I don't want to pay
you back, take it from the folks in the downtown slums."
And you're not supposed to say: "I got the high yields from this risky investment,
but now that the borrower doesn't want to pay it back, the risk should be
transferred to other folks in my country through socialization of the debt. That's
the capitalist principle. It would suffice to largely eliminate the debt. Of course,
that principle is unacceptable to the rich and powerful, who prefer the operative
"capitalist" principle of socializing risk and cost. So the risk is shifted to northern
taxpayers (via the IMF) and the costs are transferred to poor peasants in
Indonesia,
who
never
borrowed
the
money.
The argument that "their country" borrowed the money so that they are
responsible surpasses cynicism, and need not be considered. In fact, it doesn't
even stand up under international law. When the US conquered Cuba in 1898 to
prevent it from liberating itself from Spain (what is called "the liberation of Cuba
from Spanish rule"), it cancelled Cuba's debt to Spain on the reasonable grounds
that the debt had been forced on the people of Cuba without their consent. That
doctrine, called "odious debt," was later upheld in international arbitrarion, with
US initiative. The current US executive-director at the IMF, international
economist Karen Lissakers, pointed out in a book a few years ago that if this
principle were applied to third world debt, it would mostly disappear. But that
would mean that the capitalist principle would have to be observed: borrowers
have the responsibility, lenders take the risk. And that plainly won't do, when the
concentration of power makes it possible to socialize cost and risk.
On first-world responsibility for the debt crisis, it is huge -- and in this case, the
responsibility extends to citizens, insofar as their countries make possible some
degree of participation in policy formation, and they do. The current debt crisis
can be traced back to policies of the IMF and World Bank encouraging
lending/borrowing to recycle petrodollars in the 1970s. Their very confident
recommendations that this was just great for all concerned continued up to the
moment of the Mexican default in 1982, when the system threatened to crash,
and the same institutions stepped in to socialize cost and debt. Another factor
was the sharp rise in interest rates in the US under the late-Carter/Reaganite
policies of a form of "structural adjustment" here, undertaken with no concern, of
course, for the fact that this would impose a crushing burden on third world
debtors, as it did. Another factor, of course, is Western support for the
murderers, gangsters, and robbers who borrowed the money for themselves and,
naturally, don't want to pay it back, when they can get the burden shifted to the
poor by the same institutions that created the debt in the first place.
First world responsibility is enormous, so much so that if honesty were
conceivable, those who supported folks like Suharto in Indonesia, drove the
lending-borrowing craze (then bailing out the banks), and sharply increased
interest rates as part of the further shift of power to the rich and privileged in the
US (and that's not all), should be paying the debt themselves.
The culpability of third world governments -- say, Suharto in Indonesia -- is
enormous, but remember that these governments are western clients, outposts
virtually, whose task is to open their countries to foreign plunder, repress the
population (by huge massacres if necessary), and enrich themselves if they feel
like it (that's not a responsibility, just an incidental benefit accorded them).
Suharto was "our kind of guy," as the Clinton administration put it, as long as he
fulfilled this role. Much the same hold for other third world governments. Those
that try to follow another course typically get smashed. E.g., Nicaragua has one of
the highest debts in the world. The Sandinistas were doubtless corrupt, though
not by preferred US standards, but that's not the reason for the debt: rather, the
fact that the US waged a brutal and murderous war to get them back into line.
Note again that culpability of our governments (and their institutions, like the
IMF-WB) are also our culpability, to the extent that we have the capacity to
influence policy, and don't.