Tricontinental; and CADTM

Here Not Death but the Future Is Frightening

Courtesy: Tricontinental

The International Monetary Fund (IMF) has released its June 2020 update. The prognosis is bleak. Global growth for 2020 is projected at -4.9%, 1.9% below the IMF’s forecast from April. ‘The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated’, acknowledges the IMF. Forecasts for 2021 are somewhat optimistic, sitting at 5.4%, which is higher than the 3.4% the IMF predicted in January 2020. ‘The adverse impact on low-income households is particularly acute’, says the IMF. Poverty reduction is effectively off the agenda. The World Bank’s recent report takes a dim view, with 2020 growth forecast at -5.2%, predicting the deepest global recession in eight decades. The World Bank’s expectation of growth for 2021 is at 4.2%, lower than the IMF’s 5.4% prediction.

This is the season of annual reports, and each one of them seems to be more depressing than the other. The IMF had earlier called the world economic situation the ‘Great Lockdown’; now, in, their new report, the Bank of International Settlements calls it a ‘global sudden stop’. Either way, they indicate the convulsion of large parts of the world economy. The World Trade Organization (WTO) had predicted a 32% decline in global trade volume, but it now seems to have only fallen by 3% (global commercial flights decreased by 74% from January to mid-April and have since risen by 58% as of mid-June, while container port traffic has recovered in June as compared to May). ‘It could have been much worse’, says WTO Director-General Roberto Azevêdo.

The International Labour Organisation cannot be as glib; the situation is as bad as predicted, or even worse. In a concept note for a conference in early July on COVID-19 and the world of work, the ILO says that the pandemic has resulted in the loss of at least 305 million jobs, with the impact slowly but surely striking the Americas. This is a conservative figure; a more radical number is that half of working-age people are without adequate income. The ILO writes that, in terms of work, the virus ‘has hit the most disadvantaged and vulnerable in the hardest and cruellest way, so exposing the devastating consequences of inequalities’.

Two billion workers are in the informal economy (six out of ten working people); of them, the ILO report notes, 1.6 billion ‘face an imminent threat to their livelihoods as average income in the informal economy shrank by 60% in the first month of the pandemic. That has brought a dramatic increase in poverty, and the warning from the World Food Programme in April that the next pandemic could be a pandemic of hunger’..

The unequal negative impact of the coronavirus recession needs to be foregrounded. In a recent interview, managing director of the IMF Kristalina Georgieva said that a 3.2% contraction of the economies in Africa would be ‘the heaviest hit on Africa at least since the 1970s’. South Africa’s economy had already begun to contract before the pandemic and is now in dire straits; Minister of Finance Tito Mboweni said that it would likely contract by more than 7.2% in 2020, the country’s most significant downturn in a hundred years. As an antidote, Mboweni has chosen the path of austerity, which – economist Duma Gqubule writes in New Frame – ‘will result in collapsing public services and rising levels of unemployment, poverty, and inequality that will turn the country into an economic wasteland’.

Faced with pressure from the IMF and from international creditors, Ghana’s Finance Minister Ken Ofori-Atta said that while the rich countries were being permitted to grow debt to stimulate the economy, countries like Ghana were being told to stick to the rules, make their debt servicing payments, and drive an austerity agenda. ‘You really feel like shouting: “I can’t breathe”’, Ofori-Atta said, deliberately echoing the last words of George Floyd.

Debt cancellation, such a fundamental issue for our time, is simply not on the agenda. In fact, the US Department of the Treasury has made it clear to the IMF that even the issuance of $1 trillion in special drawing rights (SDRs) to provide funds to cash-starved states hit by the coronavirus recession would not be possible. The US Treasury has also made it clear that debt relief is a private-sector matter that should be left to the creditors. No wonder that Ofori-Atta used the highly charged expression I can’t breathe to indicate the suffocation of the economies and people in the Global South.

Carlos Felipe Jaramillo, the Colombian economist and recently appointed World Bank Vice President for the Latin America and the Caribbean, said that the region would likely lose twenty years of advances in poverty alleviation, with at least an additional 53 million people being driven into poverty. Latin America, he said, faces ‘its worst crisis since [modern] record-keeping began, at least 120 years or so ago’.

What Jaramillo says here is amplified with clarity by a new dossier from Tricontinental: Institute for Social Research: Latin America Under CoronaShock (published in Janata, July 5, 2020). Drawing on data from the UN’s Economic Commission for Latin America and the Caribbean, the dossier shows that unemployment, poverty, and hunger will escalate out of control in the region. The IMF has said that Latin America might recover a growth rate of 3.7% in 2021, but even this is premised upon the stabilisation of the pandemic and the return of higher commodity prices, neither of which are on the horizon.

In a previous study, our office in Buenos Aires pointed out that the economic contraction that is taking place in Latin America cannot be reversed without a better monetary policy (rather than through cycles of devaluation) and the cancellation of debt (which in Argentina approaches 100% of the GDP). Despite the crisis revealed by the pandemic, political forces that are wedded to the religion of neoliberalism continue to read from its catechism: austerity, sound money, deregulated capital markets, balanced budgets, privatisation, and liberalised trade. For this reason, our dossier argues, governments in the region remain trapped within a neoliberal policy framework, which gives priority to ‘protecting the economy before protecting the people’.

To protect the economy is another way of saying to protect the idea of private property. There are hungry people, and there is food, and yet the food is not delivered to the hungry because they do not have money and because food is treated as a commodity rather than a right. Governments prefer to use social wealth to hire military and police forces to keep the people away from the food, a sure sign that the system has a desiccated soul. Our dossier, although based on material from Latin America, raises deep questions about the exhaustion of the global capitalist system in a time of great human suffering; neither neofascist nor neoliberal governments, which uphold the capitalist logic of property over human needs, are capable of managing the scale of the human catastrophe that they in part created.

(Tricontinental: Institute for Social Research is an international, movement-driven institution that carries out empirically based research guided by political movements.)

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Immediate Cancellation of South Asian Debts!

CADTM

June 8, 2020: The coronavirus has unveiled the spectre of a larger crisis. A majority of the planetary economies were already in the throes of over-production, stagnation and even, a recession, which deepened with the day, since the sub-prime crisis of 2008-09. The pandemic has exacerbated the situation. The unemployment figures are rising every day and it is estimated that many small businesses and even a few business corporations will be bankrupt. This health crisis and its cascading economic consequences could well plunge many countries in the South into an unprecedented crisis, pushing millions of people into poverty.

We will be entering a new debt crisis. Already, in July 2019, the IMF reported that among low-income countries, 9 are over-indebted and 24 are close to that situation. The external sovereign debt in countries of the South is a source of concern, notably because of its dramatic increase within the last two decades and also, due to the similarities with the pre-crisis debt situation of Third World countries in the 1980s. Additionally, the economic crisis means that export-dependent southern countries will find it difficult to earn hard currencies, the remittances are going to reduce significantly and, low financial investments. This will put enormous pressures on the capacity of these countries to service existing debts. The governments will also bail out private corporations adding enormous pressures on the public coffers.

South Asia, is no exception and faces a similar situation. The region faces enormous challenges to deal with the Covid-19 and the post-pandemic situations. The major concern for the region is, obviously, the frail healthcare systems. The daily news of death and infection has intensified the virus fears compounded by the absence of a viable public healthcare system. This is coupled with the widespread poverty, vulnerability, insecurity and precariousness that will surely get amplified with the spread of the pandemic. A gloom surrounds as we complete more than two months of lockdown.

In the region, this disaster is exacerbating the already existing insecurity and precariousness. The region’s public healthcare infrastructures lack the capacity to deal with a pandemic, of such a scale. Due to rampant privatisations carried over the last three decades. South Asia is far deficient of adequate healthcare standards including doctors, nurses, midwives, hospital beds, primary health centres and others. The overwhelming majority of the population do not have access to public healthcare and private healthcare systems during COVID- 19 turned to be more irresponsible and unaccountable by closing the doors for COVID- 19 infected people behaving them as vectors for their hospitals. This has resulted in difficult access to healthcare facilities, particularly women, children and other disadvantaged groups in the society.

Apart from healthcare threats, millions of migrant workers and daily wage earners, across the region, were stranded for months, helplessly, miles away from home, staring at an uncertain future without money, food or jobs. According to the ILO, almost half the global workforce – 1.6 billion people – are in immediate danger of having their livelihoods destroyed. It is clear that South Asia will have a disproportionate share of such impacts as the regional economies houses the largest number of precarious workforce in the planet. For millions of workers, no income means no food, no security and no future. Millions of businesses around the world are barely breathing and the smaller ones have the least recourse to necessary resources in times of such dire crisis. The self-employed and contract workers are also in imminent danger of seeing their livelihoods disappear.

The multifaceted dangers due to the pandemic can only be faced by rebuilding public healthcare systems, strengthening social protection measures including unemployment benefits and livelihood compensations, especially to those in informal economy and others who are vulnerable. This would entail a huge public expenditure and investments in the social sector, something that has been done away with in the last four decades.

The complications are compounded by the public external debt of the regional economies that has almost doubled between 2009 and 2018, from US$ 366.201 billion to US$ 730.063 billion. This debt is imposed by the international financial institutions (WB and IMF) with the complicity of the ruling classes in our countries. It is noted that most countries spend a huge proportion of their revenues in debt servicing with Sri Lanka and Pakistan having the highest debt to GDP and also, the debt to revenue ratio. The debt crisis will exacerbate an already bad condition with respect to the capability of these countries to pay back their loans. The South Asia itself was already one of the poorest regions. If the present debt burden is not relaxed, the countries in this region will be more vulnerable and trapped in crisis.

As it stands now, the debt crisis has a self-reinforcing dynamic. The rise in debt service and the deterioration in investment in developing countries will resulted in net resource transfers from the developing countries to the developed countries. This will prevent domestic capital formation and will also result in a drain on valuable foreign exchange earnings.

Any effective fight against the Covid-19 pandemic requires huge resources and therefore, the limited resources of the South Asian countries should be devoted to fight the pandemic rather than reimbursing international creditors. Under these circumstances, we demand the cancellation of all illegitimate debt of the South Asian countries. The UN body dealing with trade, investment, and development issues, the UNCTAD also recognises that the debts of many countries in the South must be written off. It has also clarified that debtor countries can unilaterally declare themselves in suspension of payments without creditors being able to demand arrears in the future.

The cancellation of external debts of the countries of the region would enable them to free vital resources for rebuilding public healthcare infrastructure, as well as other urgent needs in this economic environment, threatened by sharp drops in income, loss of taxes and revenues and increased expenditure.

It is also necessary to embark on a developmental path that prioritise peoples’ needs over the interest of the powerful and the propertied class. The resources for such developments could be generated through the cancellation of public debts. A citizen audit is also necessary to identify illegitimate, odious and illegal parties and demand their repudiation. The legal arguments of the state of necessity, fundamental change of circumstance and/or force majeure could be invoked to support such unilateral sovereign repudiation.

We also demand:

• Permanently cancel all illegitimate debt which should include all bilateral, multilateral and private debt for all the countries of South Asia especially those under heavy-debt burden with low economic growth forecast.
• Form citizens’ debt audit committee to ascertain the illegitimate part of the debts.
• Citizens should be provided necessary information on spending for better monitoring and engage them in setting priorities.
• Governments in South Asia must use the additional resources earned through debt relief to strengthen health system and protecting livelihoods. The resources should not be diverted for other purposes.
• Suspend the payment of household loans and micro-credits until countries are totally out of the grips of coronavirus;
• Replace microcredit institutions by self-managed cooperatives of local populations and by a public credit service granting loans at zero or very low interest rates;
• End privatisation of public services and the promotion of Public Private Partnerships (PPPs) whose ultimate aim is to mobilise public money to nourish the private sector;
• Use this opportunity to mobilise domestic revenue through progressive taxation on large wealth;
• Reduce defence budget in the region;
• The international financial institutions including the IMF, the World Bank and other informal groups that essentially feed North/South asymmetries should drastically change the current policies of lending
• Provide emergency additional finance to the South – excluding Official Development Assistance – by means of zero-interest loans, repayable in whole or in part in the currency desired by the debtor countries;
• Expropriate “ill-gotten wealth” by the elite, the rich and dominant classes and retrocede them to the populations concerned and under their control;
• Replace the current Official Development Assistance in its current form to an unconditional form of obligations of developed country as part of the reparation and solidarity.
• Adopt policies for a just transition.

[Endorsed by more than a hundred people’s organisations from all across South Asia.]

(The Committee for the Cancellation of the Third World Debt (CADTM) is an international network of individuals and local committees from across the world whose main preoccupation, besides the debt issue, is the planning of activities and radical alternatives for the creation of a world respectful of people’s fundamental rights, needs and liberties.)