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Canada’s finance minister dropped his own bomb on Prague — a surprise proposal that the world’s rich countries tell poor countries to just forget about paying back all those billions in loans. Paul Martin’s plan didn’t go anywhere. It seems the other suits in town weren’t onside. In fact, it looks a lot like they were shocked at his offering, a sign that he didn’t spend much time in the back rooms lobbying for his excellent idea.The unexpectedness of the proposal and the fact that Canada is still collecting its pound of flesh from Third World countries have many observers scratching their heads. What prompted the Martin outburst?
Cynics may wonder if the minister’s performance was part of the Grit election strategy — perfected for the domestic market only.
Many NGO types tried to call his bluff, asking him if Canada would go ahead and forgive debt on its own without waiting for others to come on board, but Martin answered no.
“There’s a strong possibility that Martin’s was a costless gesture and grandstanding, but I wouldn’t go that far,” says Roy Culpepper, president of the North-South Institute in Ottawa, who met with Martin this summer on the debt issue. “But it’s a good question to ask — if we really believe something is worth doing, why don’t we just do it ourselves?”
Lucy Matthews of the Jubilee 2000 Coalition, speaking to NOW on her mobile phone from the streets of Prague, with helicopters looming overhead, says she was very pleased to see Martin’s initiative, though it was only a start.
“His proposal didn’t cover all the different kinds of debt and not all the countries as well — he’s just talking about countries at the front of the queue.”
Martin’s proposal only applies to debts owed to individual countries, not those owed to big multinational institutions like the World Bank, which requires the adoption of structural adjustment programs (social service cuts, privatization, etc) as a condition for its loans.
But some of these countries are so hard-pressed for cash, they can’t even afford to pay the interest on the money they owe countries like Canada, let along the global institutions. So how can a moratorium on repayments they’re not even making possibly help?
Free-market guru Jeffrey D. Sachs, who now condemns the imposition of stiff structural reforms on impoverished states as a precondition of debt relief, tells NOW from the offices of the Centre for International Development at Harvard University that he has an alternate strategy to Martin’s. He suggests that whatever interest payments continue to come in from poor countries should immediately be funnelled into emergency medical programs. He does, however, “applaud what Martin is saying. It reflects frustration with a process that has dragged on too long.”
At the international trade and finance branch, Bruce Rayfuse admits that Martin didn’t really do a hard lobby of his fellow G-7 members, but he says his dramatic move has nothing to do with an impending election. “I don’t think this will be a particularly big vote-winner,” he says.
And why doesn’t Canada put its money where its mouth is and forgive the debts owed to us? Rayfuse says Canada holds less than 1 per cent of the debt owed by the world’s heavily indebted poor countries, so going it alone wouldn’t make much difference.
Economist Patricia Adams of Probe International, author of Odious Debts, has a more skeptical take on the Martin initiative. “Maybe he would gain a few votes from the Jubilee 2000 movement, but my hunch is that the real reason for (his action) are to get bad debts off the books of some public institutions like the Export Development Corporation (EDC). It’s a very clever way to clean up the bad books of public institutions that make very bad loans,” Adams notes.
She thinks most anti-debt campaigners neglect the way lenders dole out money for bad purposes. Adams would like to see some of these Third World loans put through odious-debt arbitration.
“We would see that due diligence was not exercised by the lenders, that they bear responsibility for extending loans to governments that didn’t represent their people.”
Number of countries with incomes of less than $2,000 per capita that spend the majority of their revenues on debt payment: 50
Total longterm debt of the above countries: approximately $230 billion (U.S.),
Amount owed to multilateral bodies (World Bank, International Monetary Fund): one-third
Amount owed to governments and private creditors: two-thirds
Amount paid by poor countries to creditors in interest and principal payments, from 1981 to 1998: over $3 trillion (U.S.)
Amount owed to Canada by the above 50 countries: $1.2 billion (Cdn)
Cost to each Canadian of cancelling the debt owed to Canada by the poorest countries: $15 a year for three years
Sources: Department of Finance, Canadian Ecumenical Jubilee InitiativeHis grandstanding in Prague more for his own benefit than for poor countries
