No Illegitimate Debt

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For the lenders, these debts are legally the debts of the peoples of the South. This must be contested.

This essay is part of the series “A Vision of Debt Justice” of Progressive International’s Debt Justice Blueprint.

We, the people of the South, have been sold a myth: That we are powerless to reject our debts because our salvation lies in the very hands of those who dominate and exploit us. But our debts are illegitimate. Challenging debt relations — not only in their present configuration, but as the products of a longer history of colonial economic expansion — is critical for our liberation.

Seen in its historical, social, political and economic context, such an understanding of debt raises the fundamental and essential question of the legitimacy of the ‘debt’ and the so-called indebtedness of the people of the South.

This question of legitimacy is beyond a legal one. For the lenders, these debts are legally the debts of the peoples of the South. This must be contested — We must question the nature of the debt, the purpose of the debt, the impact of the debt, and ultimately, who owes these debts. History is replete with examples of policies and measures which are legal but nevertheless profoundly unjust and unacceptable.

Not Our Debt

International and northern lenders themselves created the situation of indebtedness and the “need” for borrowing through a long history of colonization, neo-colonization and capitalist globalization involving the exploitation of the peoples, communities, natural resources, and economies of the South and the consequent impoverishment of South countries. In most countries, the resulting maldevelopment, poverty and lack of financial resources created a dependence on imports, on extremely unequal terms of trade — all these then becoming justifications for external capital to force itself into countries in the form of aid, investments, and loans.

Such is the nature of this system, that the very forces and institutions that exploit us, present themselves to be our benefactors and the bearers of the solutions to our problems.

This is not a lesson in history. International creditors, especially lenders from the Global North, use debt today as an instrument for the continued plunder of the South, actively cultivating the need to borrow, and then relentlessly pushing loans on to governments and private corporations in the South.

In addition to making huge profits through interest payments on the loans, lenders use debt and credit as political leverage. Local elites are often happy to acquiesce, accepting brutal conditionalities attached to loans, even as such debt seeks to subvert the rights and capacities of nations and peoples to define and direct their development programs and processes. The cycle persists: Relations of dominance and exploitation remain intact decades after national liberation struggles and wealth and power continues to be concentrated in the North, despite the so-called “global” capitalist system.

Returning to the original question, whose debts are these? Imposed by global technocrats, accepted by technocratic elites at home, the people have no say. In many countries, these debts lined the pockets of corrupt government officials. In fact, loans to private corporations and cronies were often guaranteed by governments which subsequently assumed payments for these loans, using public funds.

Many debts were contracted through questionable, fraudulent and illegal means, by illegitimate parties, with illegitimate terms, for illegitimate purposes. In just the last few decades, we see numerous examples of illegitimate debt:

  • Debts contracted by corrupt and undemocratic governments, dictatorship, and military regimes. (In protests organized recently in April 2021, the people of Kenya hijacked the IMF-World Bank annual spring meeting to demand that the IMF not issue Kenya a loan because their government was corrupt)
  • Debts contracted in manners and processes that involved deceit and fraud and other irregularities such as the use of bribes, overpricing of projects, coercion, abuse of power and various forms of violation and circumvention of proper procedures and requirements: In a number of instances, debts were contracted in violation of constitutional and legal requirements.
  • Debts saddled with onerous and unjust terms: One example was the unilateral increase in interest rates imposed by creditors, made possible because of the floating interest rates that were part of loan agreements. These high interest rates made the debts even more burdensome over time.
  • Loans spent on projects harmful to people, communities and the environment: Borrowed monies were pocketed by public officials and/or cronies for their personal use. Funds were used for anti-people policies and activities such as apartheid, military operations, repression and subversion of human rights.

In many countries in the South, payments on interests alone is the single biggest item in public spending. Consider this: In the middle of a global pandemic, Africa is spending three times more on debt repayments to banks and speculators than it would cost to vaccinate the entire continent against Covid-19.

Servicing of these huge debts put an unsupportable burden on South countries, and has a devastating impact on our people, our economies, and the ecology and environment. As debt payments take priority, basic rights of people, like the right to health, education, housing, and food are the first to take the fall.

The Burden of History

We did not consent to this debt regime. Most of these debts have been contracted and accrued without consultation with and without consent of the people, debts from which they have not benefited, debts which in many instances have in fact been used against them. One look at the numbers makes it clear: The original debt has been paid many times over by the people of the South, in financial and economic terms, in social and environmental terms, and in human terms. The people of the South should not be made to pay these illegitimate debts.

If one is looking for heroes and villains in this story, the peoples and countries of the South are owed, in fact, an enormous historical, social, and ecological debt — our riches stolen by the North. The neoliberal global economic system, which is responsible for the debt problem, is destructive and genocidal in its workings and effects. The same institutions and system responsible for the debt problem cannot bring a lasting solution to it. That system must be changed and can be changed.

Local national and international debt campaigns and the development of alternatives must be rooted in a perspective and analysis that takes the issue of legitimacy into account. For us, a major aspect of campaigning is the task of challenging dominant frameworks, assumptions, concepts and assertions, setting the terms of the debate, and offering a strategic direction and vision for people’s actions. We should raise the issue of the legitimacy of debt and assert our definitions of what constitutes legitimacy and illegitimacy.

The issue of the illegitimacy of debts clearly shows that the global call for debt cancellation is not a matter of charity towards the impoverished countries of the South. Debt cancellation is not just about whether South countries can or cannot afford to pay the debts. The issue of illegitimacy makes debt repudiation not only an imperative for survival and development, the repudiation of illegitimate debts should be upheld as the right of peoples and nations and an obligation of the governments of the South.

We understand that asserting our comprehensive framework on the illegitimacy of debt is not a simple matter of repeatedly stating our analysis and position. We know that promoting the strategic calls for total debt cancellation for all South countries and debt repudiation is not a simple matter of carrying these slogans everywhere. The struggle against debt domination involves waging campaigns that aim for political as well as concrete victories along the way, including changes in processes and policies that will broaden the discourse, increase democratic empowerment and participation, and provide concrete improvements in the conditions of our people.

The rise of illegitimate debts is decades in the making. And in the wake of this pandemic, it is only set to worsen, as developing countries move from managing the pandemic to mending the economic damage from lockdowns, bankruptcies, and abandoned investments from abroad.

Our topline demand is simple: No to illegitimate debt. But as we have argued in the piece, delivering it will require a more systematic re-evaluation and transformation of the international financial and economic system.

Lidy Nacpil is a member of the Progressive International Debt Justice Collective. Lidy is coordinator of the Asian Peoples Movement on Debt and Development (APMDD) and vice president of the Freedom From Debt Coalition in the Philippines.

From the Blueprint team at Progressive International

We live in a world of debt. The depth and breadth of global “debtification” is difficult to overstate. It is the primary contention of this collection that all these disparate dynamics — hedge funds raking in pandemic profits, students struggling to afford an education, micro-borrowers on the brink of bankruptcy — are different manifestations of the same basic structural mechanism at the heart of the global financial system: the endless cycle of privatized gains and socialized losses. Simply put, the rich get richer, while the poor, by design, remain poor.

The goal of this Collective is the goal of progressive movements around the world, to end that cycle. Read the full Debt Justice Blueprint here. If you’re interested in engaging with us, please write to Varsha Gandikota-Nellutla at [email protected]

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Available in
English
Authors
Lidy B. Nacpil
Published
22.04.2021

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