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Abolishing debt slavery
by Patricia Pitchon

A report on the inadequacy of the "free market's" response to increasing poverty in marginalized poor countries, suggesting land-tenure reform, NGO-monitored credit, increasing/speeding up debt relief, and improving food distribution directly to the urban and rural poor.  

Recent studies indicate that some 800 million people in the world today, many of them living in parts of Asia and Africa, have an inadequate food supply. But the figures are rising and the picture is worsening, due to recent stock-market falls and currency crashes in Southeast Asia (as in Korea, Thailand, Malaysia and Indonesia). In these countries thousands of companies are going bankrupt and millions of people are losing their livelihoods. This catastrophe was brought on in part through imprudent lending and borrowing, much of it on a short-term basis, partly through lax supervision of these activities, further aggravated by the flight of foreign investors when confidence was lost.

The international community now worries about a possible currency devaluation in China, suddenly in an unfavourable position because other countries in the region are exporting goods at much lower prices to try to climb out of their disastrous situation. A currency devaluation in China could spark further devaluations in neighbouring countries, plunging them into ever more debt. There are also concerns about Japan, where banks are carrying billions of dollars in bad loans, many of which may ultimately be unpayable. Many of these banks have loaned considerable sums to Southeast Asian countries and are now further exposed. Current estimates of bad loans carried by Japanese institutions amount to as much as $600,000 million. Were major Japanese banks to crash, the panic engendered could cause a world-wide stock-market crash.

Compared to the many billions promptly found through the International Monetary Fund (IMF) to shore up ailing Southeast economies (which some fear may not, in any case, be sufficient), the initiatives required to help the very poorest countries, particularly in sub-Saharan Africa, do not amount to much. Despite a World Bank initiative launched with much fanfare and upbeat press releases at the end of 1996 to help the so-called HIPCs (Heavily Indebted Poor Countries), very few have benefited. To date, only four countries (Burkina Faso and Uganda in Africa and Bolivia and Guyana in South America) have become eligible for debt relief.

The requirements for debt relief are stringent: countries must undergo a three-year economic, administrative and policy restructuring (the so-called Structural Adjustment) to qualify. Greater transparency and accountability are all to the good, but lowering trade barriers and making already vulnerable economies more open have had mixed results in many countries, where there is some evidence that the poor have become even poorer. This is one variant of the familiar 'winners and losers' recipe, which may achieve currency stability and other benefits at the price of further impoverishing a significant proportion of the population. In many countries, basic foodstuffs have become more expensive compared to the salaries of the average low-paid worker. It is estimated that the landless poor have to pay as much as 80 per cent of their income to feed themselves.

This stark picture contrasts with a recent, upbeat report, The World Food Outlook, compiled by two World Bank officials and an Australian academic. This report rightly refutes alarmists who predicted shortages of world food supplies several years ago. Remarkably, although the population of the world continues to rise, so the capacity to feed ourselves has also foiled predictions of doom and has kept pace with the demographic explosion. However, there is not a single word in this report about how we can deal with the abject failure to redistribute efficiently from surplus areas to needy areas. It has been pointed out by some analysts that dumping cheap food on Third World markets can depress food prices local farmers rely on. This is true, but the stark fact remains that current market mechanisms lead to the absurd situation that, although there is enough food in the world, many millions go hungry because they cannot afford to buy it.

Poverty and hunger are now understood to have multiple causes, but these are not beyond the reach of our understanding. For example, structural reform of land tenure in many Third World countries could improve the situation. Major international lenders impose profound change on societies around the world but are strangely mute on land-tenure issues.

By the early 1980s, 4 per cent of the world's big landowners controlled half of the world's cropland. In 83 poor countries, 3 per cent of the landholders own or control four-fifths of the land. In Asia, between a third and half of the rural population own no land at all. Yet, in terms of food productivity, most small farmers produce more food per acre than larger ones. In Brazil, Chile and Argentina small family farms produce over 8 times as much to the acre as the largest farms. In Colombia, the small-farm production is 14 times greater. But 58 per cent of small-holders have to make do with 8 per cent of the world's cropland. The obvious conclusion is that land redistribution can increase food security and self-sufficiency and halt the drift to the cities, where the poor lead precarious lives with no or only casual employment.

Perhaps no tangible benefits for the West are at stake here. Multinationals, particulary those which are attempting to command every process in the food chain, from planting and harvesting to 'adding value' through food processing and packaging to selling, do not look sympathetically at proposals that make the rural poor more self-reliant. The current free-market economic models also create situations which make many farmers reliant on cash crops for export only (a feature of some international bank loan programmes). This lack of local diversity not only diminishes self-sufficiency, but also makes farmers vulnerable when prices of agricultural products (primary commodities) suddenly drop on the world market. In the last few years, commodity prices have been falling. Excessive reliance on any one export, the plight of many Third World countries, also makes them vulnerable to world recessions, changes in exchange rates and new technologies. Diversity in both local production for self-sufficiency and in exports is necessary yet often resisted by major power brokers in wealthy nations, who seem to want a pliant, compliant and dependent Third World.

Floods, droughts, crop-destroying plagues and civil wars also play their part. But civil wars are also often the result of severe socio-economic imbalances which some policies perpetuate or aggravate.

People also remain impoverished and vulnerable in part because of inappropriate or inadequate credit instruments which avoid the development of adequate 'micro-credits'. These are very small and therefore repayable loans which effectively spur development but which are often ignored in the thinking of major lenders and banks with no instruments in place to develop them. The non-governmental organizations (such as major and accountable development charities) can play a role. The extension of credit in this way (which benefits the rural and urban poor most directly) needs to happen on a much larger scale than at present, and heads off the complaint, so often heard, of corrupt officials in any country pocketing a percentage of the loans or grants. In India, it is significant that as much as 25 per cent of all foreign assistance is channelled through non-governmental organizations.

Development policies and loans structured to ignore the crucial role of women in Third World farming also delay the development of self-reliance and food security in various countries.

Finally, a modern form of slavery, namely debt slavery, plagues many countries. This is the focus of the British-based charity Christian Aid, which is linking with 50 other charities, community and church groups and writers in various countries in a 'Jubilee 2000' campaign for debt forgiveness for the world's poorest countries. Drawing on the humanitarian traditions of slavery abolitionists such as William Wilberforce, the groups who form part of the Jubilee 2000 campaign have called themselves the 'debt abolitionists'. They cite a United Nations Development Programme estimate that 21 million children could be saved by the millenium through cancellation of external debt owed by the world's poorest countries.

Tanzania, for example, is one among several countries which has had to spend over a third of its wealth simply to service its external debt. Most sub-Saharan African countries have merely struggled to pay interest without ever succeeding in reducing the debt itself. The international lending institutions in the West seem to benefit by judicious application of the debt tourniquet, not allowing countries to collapse altogether, ensuring interest repayments keep coming, but ensuring also that the debts can never be repaid either. This, on a country-wide scale, replicates the 'bonded labour' situation in Third World countries where workers owe their loans all their lives and have to keep working merely to keep alive, without earning anything other than their food. You can never make headway simply by servicing a debt to pay off interest rather than reducing the debt itself. Yet this is the situation in some of the 40 countries of sub-Saharan Africa.

Growing public awareness through campaigns such as Jubilee 2000 can persuade the world's richest countries (the so-called G-7 countries comprising mainly European countries, the Unites States and Japan) to write off the crippling debts of the poorest countries. Other initiatives in this regard, have come to nothing or proceed too slowly. One plan was that the IMF should sell its gold reserves; this plan was opposed by both Japan and Germany. Leadership from the United States has also been strangely lacking. Some of the 'announcements' seemed designed more to placate a growing body of discontented public opinion than to precede tangible action. There is a great difference between the announcement of debt relief initiatives and their substance. Perhaps the hope is that the public will go to sleep, without tracking the meagre sequels that follow the announcements.

Aside from extending micro-credits and restructuring debt relief to speed it up and to increase it, food redistribution mechanisms need to be carefully worked out. Many studies point out that much food is lost through inadequate infrastructure to take food to market or to store it adequately. This being the case, until better transport, storage and marketing mechanisms are in place, as well as land redistribution and greater use of credit mechanisms targeted directly to the rural and urban poor, the major aim has to be to feed the people now, despite and even because of the current inadequacies.

It is painfully obvious that the market, left to itself, cannot deliver this. The obvious solution is an international food agency to redirect food to areas of need, with the specific aim of ending hunger and starvation within a few years. The right to life itself has to become the highest priority.

(References:Mitchell, Ingco and Duncan, The World Food Outlook, Cambridge University Press, 1997.  State of The World 1997, Worldwatch Institute Report, Earthscan Publications Limited, London. E.M.Young, World Hunger, Routledge, London and New York, 1997. Middleton and O'Keefe, Disaster and Development, Pluto Press 1998. The New Abolitionists, Christian Aid report, London, 1998.)

 From the April 1998 issue of Share International.

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First published April 1999, Last modified: 15-Oct-2005