The Debt Boomerang by Susan George

The debt boomerang
The Third World debt crisis is doing you harm – whether you live in the North or the South. Susan George explains how a small elite is making a killing at the expense of the world’s majority.

If the goals of managers in the official institutions that rule over Third World debt were to squeeze the debtors dry, to transfer enormous resources from South to North and to wage undeclared war on the poor continents and their people, then their policies have been an unqualified success.

If, however, their strategies were intended – as official institutions always claim – to promote development beneficial to all members of society, to preserve the planet’s unique environment and gradually to reduce the debt burden itself, then their failure is colossal.

The most obvious aspect of this failure – or success, depending on your point of view – is financial. Every single month, from the outset of the debt crisis in 1982 until the end of 1990, debtor countries in the South remitted to their creditors in the North an average six-and-a-half billion dollars in interest payments alone. If payments of the principle are included, then debtor countries have paid creditors at a rate of almost twelve-and-a-half billion dollars per month – as much as the entire Third World spends each month on health and education.

Moreover, the debt crisis has given creditor countries the chance to intervene in the management of dozens of debtors’ economies – using the International Monetary Fund (IMF) and the World Bank. Their job is simple: to make sure the debt is serviced. Since the average citizen of a low-income debtor country earns less than one fiftieth of the average citizen of a high-income creditor country, this process is like trying to extract blood from a stone.

To accumulate hard currency and service its debts a country must increase its exports and reduce government spending. Most debtor governments have accepted this and forced their people to co-operate with the draconian policies of the IMF and World Bank to ensure that debts are serviced. Much good has it done them. A decade has passed since the Third World debt crisis first erupted, yet in spite of harsh measures faithfully applied this crisis is today more intractable than ever.

Bureaucratic immunity
Debtor countries have deprived their people of basic necessities in order to provide the private banks and the public agencies of the rich countries with the equivalent of six Marshall Plans (the programme of assistance offered by the US to Europe after the Second World War).

Have these extraordinary outflows served to reduce the absolute size of the debt burden? Not a bit: in spite of paying out more than $1,300 billion between 1982 and 1990, the debtor countries as a group began the 1990s a full 61 per cent more in debt than they were in 1982. Sub-Saharan Africa’s debt increased by 113 per cent during this period.

The economic policies imposed on debtors by the major multilateral agencies and packaged as ‘structural adjustment’ have cured nothing at all. They have, rather, caused untold human suffering and widespread environmental destruction, emptying debtor countries of their resources, rendering them each year less able to service their debts, let alone invest in economic and human recovery.

The World Bank and the IMF structural adjusters have by now had plenty of time to make their measures work. But they have failed. Had they been corporate executives they would doubtless have been sacked long ago for incompetence. But no such accountability applies to these international bureaucrats acting on behalf of the creditor governments. They need never submit to the judgement of their victims. They answer only to their own equally unaccountable superiors and, at the top of the bureaucratic tree, to a Board of Governors reflecting the majority voting strength of the richest creditor countries. These lavishly compensated international civil ‘servants’ are consequently still to be found in Washington and throughout the Third World living exceedingly well.

There are other beneficiaries. For business corporations operating in debtor countries structural adjustment has enhanced profitability by reducing both wages and the power of the unions. For many international banks, debt service payments at unusually high interest rates in the early 1980s helped to fuel several years of record earnings. From the corporate or banking perspective the World Bank and the IMF pass the test with flying colours.

Third World elites don’t have much cause for complaint either. They have weathered the ‘lost decade of the 1980s’ with relative ease and have sometimes profited handsomely from it. They too benefit from plummeting wages. Their money is often in safe havens outside their own countries. Each time the IMF requires a devaluation of the national currency to encourage exports those whose holdings are in foreign currencies automatically become richer at home. And although public services may deteriorate or close down, rich people can afford private ones. So it is not surprising that Third World governments have failed to unite and to demand debt reductions.

The debtors’ lack of unity ensures the draining of their economies and a continuing South-to-North resource flow on a scale far outstripping any the colonial period could devise. The debtor governments have from time to time called for debt relief but have never collectively confronted the creditors. As a reward for docility the creditors have allowed most debtor-country elites to maintain their links to the world financial system, providing them with at least a trickle of fresh money and offering them frequent opportunities to purchase local assets at bargain prices through so-called ‘debt-for-equity swaps’ or privatization programmes.

Third World debt should not, therefore, be seen as a straightforwardly ‘national’ problem. Different social classes in debtor countries have vastly divergent interests and are unequally affected. Although debt has visited unprecedented pain on the vast majority of Third World people, the crisis is not necessarily a crisis for everyone.

While the topmost layers of Third World societies remain largely insulated from debt distress, ordinary people in the South sacrifice to pay back loans they never asked for, or which they even fought against and from which they derive no gain. Knowledge of their plight is by now fairly widespread in the developed, creditor countries, thanks to the efforts of thousands of concerned people patiently explaining the human and ecological consequences of the debt crisis in the Third World.

Fallout in the North
Yet the pressures exerted by dozens of non-governmental organizations in both North and South have so far failed to alter basic debt-management policies. Although the Fund and the Bank now claim they seek to ‘mitigate the social costs of adjustment’, official response to the crisis advances at a calculated snail’s pace, inching from one feeble and ineffective ‘Plan’ to the next while leaving the status quo essentially untouched.Until now those in the North who have tried to change the debt management strategies have rightly based their arguments on ethical and humanitarian grounds.

The impact of Third World debt fallout in the North is much less well known – doubtless because the consequences of debt are far more serious and life-threatening in the South than in the North. But although people in the South are more grievously affected than those in the North, in both cases a tiny minority benefits while the overwhelming majority pays.

Northern taxpayers have carried commercial banks through the Third World debt crisis from the start and virtually all of them are blissfully unaware of the fact. We have paid Northern banks between $44 and $50 billion in tax relief on bad debts – enough to meet the entire Third World’s health spending for one year.

There is another less measurable cost: the strong correlation between debt and worldwide military conflict. Loans have frequently been employed by Third World governments to buy arms from Northern manufacturers for use against both internal and external opponents. Debt promoted the Gulf War. Saddam Hussein saw the invasion of Kuwait as one way of wiping out the colossal debts he owed both to that country and to the allies – much of it used to finance his arms build-up. George Bush granted massive debt forgiveness to an allied Arab nation like Egypt as a reward for staying on his side.

Third World debt is not the only cause of, say, increased illegal drug exports to the US and Europe, or of accelerated deforestation hastening the greenhouse effect. But it is, at very least, an aggravating factor. Debt-burdened Latin American governments become hooked on dollars from their coca-producing regions. This severely dampens their incentive to encourage legal crops. Increasing drug exports, in turn, escalate the costs of law enforcement and contribute to social breakdown in the North.

A stake in change
Such harmful effects did not suddenly spring fully armed from the head or the belly of the World Bank. They result from a set of policies aimed at promoting a capital-intensive, energy-intensive, unsustainable Western model of development which was favourable only to Third World elites, Northern banks and transnational corporations.

Not surprisingly, massive overborrowing coupled with high interest rates led to the debt crisis. This crisis in turn provided official debt managers in the 1980s and 1990s with a perfect lever to entrench the very development model which had caused the original problem. Relying on unbridled free market forces and export-led growth, they have devastated the unprotected: the poorest, most vulnerable groups and the environment.

They are still doing it and, quite simply, they have to be stopped.

Any standard of human decency or ethical imperative demands a change in debt management, but so does enlightened self-interest. Everyone outside the narrowest of elite circles has a stake in positive change. If enough people in the North realize that the Third World debt crisis is their crisis they may well insist on radically different policies, speak out and seek to join with similar forces in the South.

For this to happen we must first think for ourselves, recognize the modern mythology that prevents us from acting and then act. There are some obvious directions we can take to help the ‘natural majority’ to become effective. Workers, farmers, trade unionists, activists, parents, immigrants, taxpayers – we all have to make a common cause against the common danger.

We do not want to prescribe a programme but to state some principles:

First, those who borrowed were rarely elected by their peoples. They squandered money on arms or used it to further entrench their own power and privilege, counting on their poorer compatriots to make sacrifices to pay back the loans when due. Democratically elected governments should not be expected to assume the debt burdens of dictatorial predecessors.

Those who made the loans were either irresponsible or intentionally attempting to make the debtors subservient to their interests. The creditors have been richly rewarded and are in no danger if the debt is cancelled or converted to provide genuine development. They should play by normal rules and not expect the public to pay for their costly mistakes.

The debt has already been largely or entirely repaid. The North is, in fact, substantially in debt to the South and it has received, since 1982, the cheapest raw materials on record.

But cancellation and other debt reduction measures must not be used as an excuse or a pretext to further cut the debtor countries out of the benefits of the world economy. The guiding precepts should be popular participation in decision-making at every level, social equity and ecological prudence.

So long as the policies of the rich North represent a mixture of crude carrot-and-stick manoeuvres, coupled with basic contempt for the South, its problems and its peoples, we can expect more lethal North-South tensions, more powerful boomerangs hurtling back at us, a further forced retreat of the rich countries into Fortress America or Fortress Europe.

Alternatively, we could decide that it is time – high time – we began to live together on this improbable planet as homo sapiens with a good deal more sapiens.

Economist Susan George is a prolific writer, thinker and prominent campaigner on the subject of debt. Her books include How the Other Half Dies, A Fate worse than Debt, Ill Fares the Land and most recently The Debt Boomerang (Pluto, 1992).

The six boomerangs

Debt-induced poverty causes Third World people to exploit natural resources in the most profitable and least sustainable way, which causes an increase in global warming and a depletion of genetic bio-diversity. This ultimately harms the North too. The illegal drugs trade is the major earner for heavily indebted countries like Peru, Bolivia and Colombia. The social and economic costs of the drug-consuming boom in the North is phenomenal – $60 billion a year in the US alone. Governments in the North have used their tax-payers’ money to give banks tax concessions so that they can write off so-called ‘bad debts’ from Third World countries. But in most cases this has not reduced the actual debts of poor countries. By 1991 UK banks had gained from tax credits for more than half their exposure. The eventual total relief will amount to $8.5 billion.

Exports from rich countries to the Third World would be much higher if those countries were not strapped by debt, and this would stimulate manufacturing and employment in the North. The loss of jobs due to ‘lost exports’ is estimated to account for one fifth of total US unemployment. The International Labour Organization estimates that there are about 100 million legal or illegal immigrants and refugees in the world today. Many go to the richer countries of the North to flee poverty and the effects of IMF-imposed economic policies. Debt creates social unrest and war. Iraq invaded Kuwait in 1990 largely in retaliation for the latter’s insistence that Saddam’s regime repay a $12 billion loan.

Do Watch Namewee’s Nasi Lemak 2.0 – by Anas Zubedy

Since I came back from watching Nasi Lemak 2.0 about a month ago, I find myself doing two things: One, I’ve been eating more nasi lemak, and two, I’ve been advising as many people as possible, especially participants in my programs to go watch the movie. Every single one of them, regardless of race, liked it and thanked me for the recommendation. They found it to be a very entertaining, Malaysian movie.

While everyone is entitled to their opinion, with due respect to the Utusan writer Fauziah Arof, I too would like to give my take on the movie. I found Namewee’s work not only to be an entertaining example of 1Malaysia in comedy, but I also see creative and artistic value in it. As such I would encourage more people to watch the show and give support so that more such movies are produced.

I do not know Namewee personally, but based on the story of the movie, I see it as a reflection of his life, albeit in a comical way. It shows the journey of a young man who grew up in Chinese surroundings, in isolation from those of other races, rediscovering himself as a Malaysian. This is not altogether surprising to me, because I’ve met many Malaysians, regardless of race, who like Namewee have been through or are going through the same process. I will give you an example at the end of this note.

The premise of Nasi Lemak 2.0 is the story of a young chef in Malaysia who grew up in a Chinese setting, had minimal contact with other races, went to a Chinese institution, and consequently felt that everything Chinese is great and everything else is inferior. At the start, he refuses to touch any food other than Chinese food, which he believed was far superior. Somehow along the movie, he discovers nasi lemak for the very first time…. and is shocked by the wonderful new taste he had never experienced before. In the movie, nasi lemak symbolizes everything Malaysian - a combination of different cultures coming together into one great Malaysian flavour.

Stunned by his discovery, he goes on a journey to find out how he can achieve that wonderful taste. Along the way he rediscovers ‘Chinese-ness’ ala Malaysia, in Malacca among the Baba Nyonya. To find out more about making curry, he goes to an Indian curry master’s home. Interestingly there he goes googoo gaga over an Indian beauty. Later, he goes into a Malay kampung home. At the end, he discovers his Malaysian-ness that does not mean to let go of the pride of being a Chinese, but he becomes a Chinese Malaysian rather than a ‘Chinese’ Chinese.

Namewee also has managed to return the fun of Malaysian racial jokes and pull it off, funny but not offensive. We used to have enough sense of humour to be able to do that. He gives us the chance to laugh at ourselves again. For example when he visits an Indian home for the first time in the movie, innocently he says that based on the movies, Indians are always hiding behind trees or in bushes... we all laughed at that. Or how towards the end, the mythical-like Chinese sifu turns out actually to be a fraud… and the antagonist, a Chinese chef from China, marches out at the end in communist soldier uniform professing loyalty to China. A brilliant funny moment in the movie is when Namewee’s character was in a Malay home with a man and his four wives and tries to make a smart alec comment in Mandarin. Little did he realize that not only could one of the wives speak Mandarin but also recited Chinese classical poetry.

Namewee managed to sell the idea that it’s okay to be racial but not okay to be racist… something I have been proposing for some time. It is refreshing to see that now through Namewee’s work, we can laugh at racial jokes again, without being worried about hurting each other. This can only stand from the confidence that when we do so, we are not being racist, but in fact we can laugh at each other, with each other, because we can love each other.

Namewee is a talented young Malaysian who we should support. With proper support, mentoring, and opportunities, we have with us a Malaysian who is likely to produce creative, sellable, different and special movies that can not only be marketed in this country, but also worldwide. It will be a shame to leave this gem unpolished.

As I said earlier, this scenario of a Chinese, Malay or Indian growing up in a separate environment without interaction with other ethnicities is not an isolated case. One of my previous students grew up this way up to her University days. When she entered university and found out she had to share her room with two Indian girls, she cried for many days and opted to engage with them as minimally as possible. As soon as she could, she moved out of campus. However, when she started working, she could not run away from having to deal with others. After being in one of my programs, she wanted to have a chat with me and I suggested to meet at Nirwana Maju in Bangsar. She was very impressed with the food we had… and to my surprise - it was the first time she had Indian food in her life! She was 28 years old, grew up in Malaysia, and yet had not tasted Indian food until that time.

This same friend of mine emigrated as soon as she had a chance. When we spoke again after one year, she admitted some things. One, she confessed that she always thought that the non-Chinese in Malaysia were lazy, but she discovered that where she is now, those around her are even more lazy. Worse still, over here in Malaysia when she confronted others for their laziness, they would admit it and apologize… but in Australia they would flip her a four letter word. Secondly, when I wrote to her to wish her a Happy Wesak Day, she replied that she did not even realize it was Wesak Day… while if she was in Malaysia, ironically among different groups of people, she would have known. We joked that she’s discovering Malaysia in Australia.

My guess is Namewee too has also discovered Malaysian-ness in his own way. It’s a move forward. We have to have more hope and confidence that most Malaysians - like Namewee’s character at the start of the show, and like anyone who sees themselves as race first before Malaysian first - will one day discover their Malaysian-ness. Yes, he may be a bit offensive here and there and his video response to the Utusan writer’s negative comment was a bit rude. But most creative people will understand. Creative people see their work as if their own child and to criticize it evokes the ‘parental instinct’ in him.

I would give Namewee my support because he is definitely a gem. As a young creative producer and actor, I see in him a hint of someone with the potential to follow in the footsteps of the greats like P. Ramlee, Stephen Chow or perhaps even Kurosawa.

I wish Namewee all the best and I look forward to see his future creative work. I thank him for giving us a chance to laugh at ourselves and each other again.

By law I am Malay, by ancestry I am a mixed Malay-Arab, by choice I am a Malaysian but in the heart I belong to the Human Race :)

Peace, anas zubedy

Operasi Lalang, Isa And Security Courts by Dr. Chandra Muzaffar.

Today, 27^th October 2011, the 24^th anniversary of OperasiLalang, is different from previous anniversaries. It is the first anniversary after Prime Minister MohdNajib’sbold pledge on the 15^th of September 2011 that the Internal Security Act (ISA) would be abolished.

Abolishing the ISA means abrogating detention without trial. It follows that even with the proposed anti-terrorism law there should be judicial scrutiny. Judicial scrutiny will in no way compromise the effectiveness of the police in protecting public security. On the contrary, intelligence gathering will have to be more thorough and professional. Likewise, the power of the Minister of Home Affairs to detain a person allegedly planning an act of terror should remain intact. Preventive detention of this sort in cases involving terrorism and violence is critical for saving lives and preserving public order.

However, the Minister’s decision should be subjected to judicial review. This is to ensure that regardless of the type of violence that a suspect is allegedly guilty of, his right to a fair and objective evaluation of the evidence against him is respected. For this purpose a special Security Court could be established headed by a retired Judge and two other persons one of whom could be a retired senior police officer knowledgeable in security matters. The panel would have complete access to all intelligence reports on the suspect and the suspect would have the benefit of legal counsel of his choice. Given the clandestine nature of terrorist operations, and the need to protect witnesses and informers, the proceedings could be in camera. The decision of the panel on whether the suspect should be incarcerated or acquitted would be final and non-appealable.

This approach upholds both the rights of the person and national security. The powers of the Executive in relation to investigation, detention and prosecution will not be curbed or curtailed. Yet, judicial authority in the service of human rights would also be recognised.

The concept of a Security Court proposed here will be confined to security cases related to terrorism and violence. Other threats to national security emanating from ethnic chauvinism or religious bigotry (as long as there is no resort to violence) should be dealt with in the ordinary courts. In this way we would also strengthen the role of the Judiciary which is important in a democracy.

There are of course discordant voices arguing for the retention of the ISA and detention without trialin order to combat communalism and bigotry. The last 24 years--- since OperasiLalang--- have shown us that detaining a communal agitator or a bigot will not change his thinking or his beliefs. In fact, some of those ex-detainees have become even more communal in their attitudes. Apart from addressing the root causes, it is through persuasive counter arguments, education,and the positive experience of multi-ethnic living that we will be able to reduce communalism. Laws such as ISA are of little use.

Dr. Chandra Muzaffar.

Kuala Lumpur.

27 October 2011.

Deepavali advert - Monday in The STAR

Have a meaningful Deepavali: Choose the Middle Path

"It is a right and duty of the wise ones to purify the strong by teaching them their duties and to strengthen the weak by teaching them their rights."
-Subramanya Bharathi (1882 - 1921)

Why the middle path?

Here in Malaysia, we have been on the middle path from the very start.

We are situated in the middle between the northeast and southwest monsoons, the natural meeting point of the East and the West. As its height, it is said that eighty four languages were spoken in Malacca by merchant communities as diverse as Gujaratis, Indians and Burmese, Southeast Asians, the Chinese and Japanese.

The spread of religion in Malaya did not involve force. Our early Hindu-Buddhist period brought a glorious legacy of Sanskrit literacy and the tradition of kingship which we practice until today. When Islam arrived, it attracted our people with its inclusivity and moderation which absorbed rather than conquered the existing beliefs. When Christianity came, it was also embraced and accommodated without conflict. And until today we maintain a weave of different religions, all of which did not arrive with compulsion, but are embraced with moderation, accommodation and mutual respect.

The Buddha described the path of wisdom as 'the middle path' and taught about moderation in the right understanding, conduct and efforts. Hinduism teaches about a balanced life for holistic growth in body, mind and spirit. The Bible talks about temperate behaviour between the things that are permissible and the things that are beneficial. Islam prescribed 'sebaik - baik pekerjaan adalah yang pertengahan' as a way of life. All our faiths emphasize the middle way in personal growth and social harmony.

When it came time for our Merdeka negotiations, once again it was the middle path which prevailed. Our Federal Constitution has, at its core, the spirit of moderation. Rather then being idealistic, our forefathers were wise to be pragmatic to the realities of our society. The genius of our Constitution is its framework of workable compromise that has managed to bind together the weave of our multiracial, multireligious and multilingual nation.

The middle path has been our foundation form the very start. It is our way of life. Whether we embrace it or not, our legacy has proven that for our diverse society, we need to have the right balance between right principles and right pragmatism. We need to be grounded in real situations, not idealism. To choose the right compromises sometimes, so that we do not compromise the very core that keeps our nation intact.

The middle path is the path that favors moving forward. It does not mean to be 'lalang' or to shrug off making decisions. Rather, it is making a stand to apply the right principle, in the right capacity and at the right time, to create a workable path. It is choosing our shared values as our basis, and the spirit of empathy and moderation as our practice.

At zubedy, our programs draw strength from shared values and traditions. We believe that at heart, all Malaysians want good things for themselves and for their brother and sister Malaysians, simply because our nation cannot prosper as a whole if some of us are left behind.

To be or not to be ... an entrepreneur - The STAR online by Tan Thiam Hock

MY big aunt once told me that I should be very proud of myself because I built a business from nothing.

I told her I would have gladly exchanged places with my cousins who went straight into their big family business upon graduation and became major corporate players by the age of 30. I spent 10 years of my life looking aimlessly for that one Big Idea that will instantaneously transform my business life. I never did find one.

The Big Idea is a myth. It is the figment of a wannabe entrepreneur's imagination. More so in the current world where there is stiff competition in every single business that you can think of. Tell me which Malaysian tycoon made his zillions legally from that one big idea that swept the world? None. Did I mention legally? None.

The low cost carrier model was based on a very successful Ryan Air in Europe but AirAsia took the opportunity and adapted it to the Asian airspace successfully. Astro brought in pay-TV which started 15 years earlier in the United States. YTL had a lucrative first bite at being an independent power producer when the opportunity arose, but again privatised utilities were nothing new.

For any successful entrepreneur, it has always been about having a keen nose to smell an opportunity and that is what separates the men from the boys. Nowadays they called it Blue Ocean strategy, or something like that ...

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Join Anas Zubedy's discussion in the 1Malaysia Roundtable

1. Anas and Dr. Chandra Muzaffar will be conducting a discussion at the 1Malaysia Roundtable, an online platform where the Malaysian public can discuss and give input to help the nation move forward.

2. Their subject of discussion is 'Empathy in the Quest for 1Malaysia' and you can take part in this discussion online from 10 - 16 October 2011.

3. Constructive and valuable ideas voted by fellow participants will be presented to our Prime Minister, YAB Dato’ Sri Mohd Najib Razak for his review and consideration.

Join the 1Malaysia Roundtable to share your views and learn insightful ideas from others.

To learn more about the 1Malaysia Roundtable, go to http://1malaysia.com.my/roundtable/page/about-1malaysia-roundtable

To join Dr. Chandra Muzaffar and Anas Zubedy's discussion, go to http://1malaysia.com.my/roundtable/view/19/empathy-in-the-quest-for-1malaysia

At variance with the Constitution by Shad Saleem Faruqi - The STAR

The clear intention of the 1957 Constitution was to allocate penal powers to the Federal Government and to confer on the states residual powers over minor syariah offences.

WHENEVER a general election appears to be around the corner, some people find it politically profitable to stoke the embers of controversy about the need for an Islamic state and its accompanying requisite – hudud laws – ie, laws relating to crimes, punishments and rights and duties that are mentioned in the Holy Quran.

Such a season of polemic is with us again and a few observations are in order.

First, it is a fact that since the 80s, many Muslims have been aspiring to give centrality to the Syariah in our legal system.

While this religious quest is understandable, its realisation requires massive legal reconstruction of the basic legal edifice.

We must be open-eyed about these changes and must accomplish them in accordance with, and not in disregard of, the constitutional charter.

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