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Joe Owens

A Fate Worse Than Debt

(Autumn 1988)


From Militant International Review, No. 38, Autumn 1988, pp. 45–46.
Transcribed by Iain Dalton.
Marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).



Susan George
A Fate Worse Than Debt
Penguin, £4.50, 1988.

The ‘Third World’ debt crisis is arguably capitalism’s most crushing indictment. Rapacious international bankers ever hungry for higher profits, with the often tacit approval of their governments, have poured loan after loan into the countries of the ex-colonial world quite aware that they can never be repaid. For them debt only becomes dangerous when it cannot be serviced; the longer the debt remains unpaid the longer they receive payment, in the form of interest, for the use of their money. For every 1% rise in interest rates there is a further $2bn–$6bn due in debt service – it is a tidy profit. From 1982, the year regarded as the point when debt went from being a problem to a crisis, until 1985, profits recorded by the US’s top banks rose from 38% to 84%. The value of their shares rose respectively from between 83% and 154%.

The risks involved in such ventures were offset by the power of the Federal government and the resources of the US Treasury who have gone to extraordinary lengths to preserve the solvency of US banking. But the generosity has not extended beyond the barracudas in the banking pool; the flip side of the coin reveals a rash of small banking failures and regional bank bankruptcies across the length and breadth of the USA.

The real consequences of the debt crisis are shouldered day and night by the men, women and children of the filthy, infested shanty towns and villages that are the feature and result of so-called ‘development’. For workers and peasants in the grip of the IMF austerity programmes crushing poverty is sometimes relieved only by death.

A Fate Worse Than Debt is a useful and highly informative introduction. Susan George outlines the background to the crisis and the role of organisations like the IMF and the World Bank. She reveals the sometimes horrifying statistics that chart the consequences of debt and austerity in the borrowing countries.

One of the main reasons for the artificial length of the present ‘boom’ has been the super exploitation of the ex-colonial world by the advanced capitalist countries. Worsening terms of trade led to a net inflow of capital to the developed capitalist world of $65bn in 1985. Debt ballooned to over $1 trillion or $1,000bn. Another feature of the debt crisis has been the outright robbery and mismanagement of loans by corrupt governments. At least 15% of the Philippines debt of $26bn was appropriated by the Marcos family. Some may have been used on Imelda’s staggering collections of shoes and knickers. But even more went on projects like the Morong nuclear power plant which was commissioned from Westinghouse for $2.1bn in 1976. The debt servicing on this project was costing $500,000 a day by 1987. Although the reactor is ready to function, fortunately it does not: it was built in the middle of the Pacific ‘fire rim’ earthquake zone at the foot of a volcano!

Failure to comply with the IMF’s ‘adjustment’ programmes to pay for debt means the loss of credit worthiness. Threat of default on payments is met by a counter threat of seizure of a nation’s assets on land, sea or air. As one US Treasury official coldly put it: “Have you ever contemplated what would happen to the health of a country if the government could not get insulin for its diabetics?”

One study recently quantified the relationship between debt and mortality: for every additional $10 a year in per capita interest payments there was 0.39 a year less in life expectancy improvement for the people involved. In the 73 countries studied in the 1970s each person had forgone 387 days of life, i.e. lost a year of life. In Peru infant mortality is estimated at 80 per 1,000 births. In the worst of the shanty towns half of new born babies die before they are one year old. This slaughter is the incalculable cost of world debt. And what is the reaction of those who preside over this? Oscar Trelles, ex-President of the Peruvian Senate commented in 1981:

“It is healthier to eat less; thin women are more attractive than fat ones, and just because Jewish children had hunger in the Nazi concentration camps, it did not make them more stupid”.

Driven by despair, deprivation and hunger children are forced to beg and steal. Many sell themselves into prostitution. What they face is not life but an unending, death defying and heroic struggle to stay alive.

At the end of her book, Susan George considers what to do. “The debt crisis is a symptom – one among many – of an increasingly polarised world, organised for the benefit of a minority that will stop at nothing to maintain and strengthen its control and privilege”. Absolutely correct! Unfortunately, however, the author’s own solution, what she calls the ‘Third Solution’ – debt, development and democracy – relies on this minority effectively giving up its control and privilege voluntarily for the good of the poor!

It amounts to this – the developing country would pay its interest payments into a ‘National Development Fund’, democratically controlled by a ‘broad-based development fund management’. This fund would finance various projects for the community. For every payment into this Fund the donor banks and lMF would correspondingly write off their debt repayments!

How can Susan George believe in this remedy when she quotes earlier the views of a Citicorp banker that “our strategy is not one of making loans but of making money”? Her dilemma is that, while advocating a solution within the confines of the present economic order, she marvellously exposes its constraints. Nevertheless her book puts a devastating case for change in terms of wasted resources and the potential that could be used if the world economy was planned and democratically controlled by and for the working class.


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