“Don’t owe - wont pay”

An academic lawyer named Alexander Sack developed the concept of `odious debt` at the begining of the 20th Century. In referring to the national debt of a country he wrote: “If a despotic power incurs a debt not for the needs or in the interest of the State, but to strengthen its despotic regime, this debt is odious for the population of all the State. This debt is not an obligation for the nation.”

Sacks work provided the legal rationale for action taken at the begining of the 20th Century by the USA in relation to Cuba. In the aftermath of the Spanish-American war the USA took over the administration of Cuba from Spain. Spain looked to the USA to repay the debt owed to it by Cuba. The US Government refused to repay debts they considered to have been “created by the Government of Spain, for its own purpose and through its own agents, in whose creation Cuba had no voice”. The debt, as far as the US Government was concerned had been used to suppress the democratic will of the people of Cuba. It was therefore an unjust debt and as such should not be repaid.

At the begining of the 21st Century, the issue of odious debt is set to become central to the debate on Third World Debt. In 1973 the United Nations described the apartheid system as a crime against humanity. During the early part of the 1980s the apartheid regime in South Africa was faced with bankruptcy; the cost of maintaining such a regime and the economic sanctions imposed from abroad had begun to take their toll. The leaders of the movement for democracy in South Africa urged international institutions and investors not to bail out the South African economy unless deomocratic reforms were introduced. However, the Swiss Government proceeded to facilitate large loans from private banks that allowed the apartheid government to stay in power. The current democratic government, which represents those who suffered from apartheid, is now having to pay back this money.

The irony of this situation, whereby the oppressed are being asked to pay for their oppression, is not confined to South Africa. The country fromerly known as Zaire was ruled for decades by Mobutu Sese Seko, a man for whom the word 'kleptocrat' was coined- a man who ruled by theft. It is estimated that he stole more than $10 billion, while he kept the people of his country in fear and poverty.

There was widespread knowledge of Mobuto’s corruption. A certain Edwin Blumenthal resigned from the central Bank of Zaire in 1980 because of “sordid and pernicious corruption” that was so serious that “there is no chance, I repeat no chance that Zaire’s numerous creditors will ever recover their loans.” Mr Blumenthal was working in the central Bank of Zaire at the insistance of the International Monetary Fund. Despite his daming report, in the six years that followed, the IMF lent Mobuto over $600 million, while the World Bank provided $650 million. Western governments lent over $3billion during the same period. Mr Mobuto had the good sense to support the West in the Cold War and to allow the exploitation of Zaire’s extensive mineral wealth by multinational companies.

President Marcos of the Phillippines was another dictator who improverished his country whilst amassing a personal fortune of over $10 billion. The Philippine Freedom from Debt Coalition (FDC) is the longest running campaign for debt cancellation in the developing world. The title of the FDC newsletter, People Against Immoral Debt (PAID). exposes their unwillingness to repay odious debts incurred by Marcos.

In each of these cases those who lent the money could be in no doubt about the standing of those who received it. Even if it could be argued that creditors were unaware of the use to which their loans were put, the question still remains about the moral responsibility of people to pay back money that was used to oppress them.

The Government that organised and carried out the genocide in Rwanda were in receipt of large loans. In recognising these loans as an example of “odious debt” the British House of Commons International Development Committee in its May 1998 report on Debt Relief (paragraphs 11 & 57) wrote that “ the bulk of Rwanda’s external debt was incurred by the genocidal regime which preceded the current administration.... Some argue that loans were used by the genocidal regime to purchase weapons and the current administration and ultimately, the people of Rwanda, should not have to repay these “odious” debts”.

As well as debts incurred by corrupt or despotic regimes, questions could be asked about loans that were given for specific projects which were chosen and designed by the creditors. The World Bank plays a major role in design, implementation and monitoring of the projects that it funds. A World Bank evaluation of 18 agricultural projects funded up to 1986 in Tanzania, found that 12 produced negative economic rates of return. The World Bank simply cannot attribute sole responsibility to the Government of Tanazia for these and other project failures.

A World Bank review of its programme in Zambia concludes that the predominace of adjustment lending in Zambia in the 1980s and 1990s was a mistaken approach. Looking at 18 projects approved during 1980-1995, only three were rated at likely to be sustainable. Between 1991and 1993 public expenditure halved as a share of Gross Domestic Product. An external review of the IMF programme in Zambia, pointed out that IMF policies resulted in high levels of inflation with heavy social costs attached.

Recently a court in Argentina made a ruling about the legitimacy of Argentinia’s debt. Between 1976 and 1983, under the military government, Argentina’s debt rose from $ 7.5 billion to $43.5 billion. These new loans were of no benefit to ordinary Argentineans. According to the judge the loans were part of “a damaging economic policy that forced [Argentina] on its knees through various methods..and which tended to benefit and support private companies - national and foreign- to the detriment of society and state companies.” He specifically cited the IMF as being culpable for lending money in an irresponsible way..

In recent years much has been done to highlight the fact that many countries cannot pay back the debts they owe. It is now time to point out clearly that it is not simply a matter of an inability to pay. Some debts should not be paid. As the slogan of Jubilee South campaigners puts it -”Don’t owe- wont pay”.

Don’t Owe, Shouldn’t Pay: Odious Debt, Illegitimate Debt, Unsustainable Debt – Who Owes Whom?

Africa's foreign debts were mostly incurred by unrepresentative and despotic regimes during the Cold War years. With the complicity of creditors, these loans were used for purposes contrary to the interests of African nations. This is known as odious debt. The Bush Administration has declared Iraq’s $120 billion foreign debt to be odious by this definition and is aggressively promoting its cancellation. The refusal to acknowledge the odious nature of Africa’s debts reveals a harsh double standard based on geopolitics and opposed to justice.

Many loans that were made for development projects or contracted by legitimate governments should also be considered illegitimate in nature because the projects were poorly conceived, imposed by creditors, and benefited foreign or corporate interests over the interests of African people. Many loans were spent on projects and economic reforms that were harmful to people, communities and the environment. In other cases the economic conditions of loan agreements further impoverished the recipient nations.

Africa’s debt is not only odious and illegitimate; it is also unsustainable and the single biggest obstacle to the continent's development. Servicing these debts diverts money directly from spending on health care, education and other important social needs. It also retards economic growth and discourages investment in African economies.

Finally, many Africans question the notion of an African “debt” to the U.S. and European countries and the financial institutions they control after centuries of exploitation. They ask, “Who really owes whom?” For Africa’s people, debt payments are simply a continuation of the continent’s historic role of financing the development of northern countries at the expense of the lives of thousands of African children who die each day from easily preventable malnutrition and diseases. African civil society organizations are increasingly moving beyond demands for debt cancellation to demands for their own governments to repudiate foreign debts and demands for reparations from the wealthy minority of countries that historically enriched themselves through the impoverishment of Africa and Africans. Africa Action supports this movement.

Question: Is oil more important than life blood of a people?

Cold War Lending - Illegitimate Debt

The country formerly known as Zaire was ruled for decades by Mobutu Sese Seko, a man for whom the word kleptocrat was coined as he ruled by theft. It is estimated that he stole more than $10 billion, while he kept the people of his country in fear and poverty. Despite widespread knowledge about his corruption, the IMF lent Mobuto over $600m in the early 1980s while the World Bank provided $650m. Western governments lent over $3billion during the same period. Mr Mobuto had the good sense to support the West in the Cold War and to allow the exploitation of Zaire’s extensive mineral wealth by multinational companies.

President Marcos of the Philippines was another dictator who impoverished his country whilst amassing a personal fortune of over $10 billion. The Philippine Freedom from Debt Coalition (FDC) is the longest running campaign for debt cancellation in the developing world. The title of the FDC newsletter, People Against Immoral Debt (PAID)exposes their unwillingness to repay odious debts incurred by Marcos.

The external debt of the countries of the South has been repaid several times over. Illegitimate, unjust and fraudulent, debt functions as an instrument of domination, depriving people of their fundamental human rights. We demand unconditional cancellation of debt and the reparation of historical, social and ecological debts.

As well as debts incurred by corrupt or despotic regimes, questions could be asked about loans that were given for specific projects, which were chosen and designed by the creditors. The World Bank plays a major role in design, implementation and monitoring of the projects that it funds. A World Bank evaluation of 18 agricultural projects funded up to 1986 in Tanzania, found that 12 produced negative economic rates of return. The World Bank simply cannot attribute sole responsibility to the Government of Tanzania for these and other project failures.

A World Bank review of its programme in Zambia concludes that the predominance of adjustment lending in Zambia in the 1980s and 1990s was a mistaken approach. Looking at 18 projects approved during 1980-1995, only three were rated at likely to be sustainable. An external review of the IMF programme in Zambia, pointed out that IMF policies resulted in high levels of inflation with heavy social costs attached. Between 1991and 1993 public expenditure halved as a share of Gross Domestic Product.

In recent years much has been done to highlight the fact that many countries cannot pay back the debts they owe. It is now time to point out clearly that it is not simply a matter of an inability to pay. Some debts should not be paid. As the slogan of Jubilee South campaigners puts it -"Don’t owe- wont pay".

Neither the G8 nor the IMF/WB have admitted to any responsibility whatsoever for the plight of impoverished countries. Many of the lenders acted irresponsibly if not criminally; western governments armed and supported several dictatorships. The west raised interest rates to astronomical levels in the early 1980s making repayment of debt impossible. IMF and WB programmes pushed on the poor countries were often ill-conceived and damaging. All of these factors are conveniently glossed over and ignored by the creditor countries and institutions.

Ireland has been a member of both organisations since 1957 and has been party to their actions since that time

Fact Sheet - Questions and Answers Sheet on Illegitimate Debts

Whose Fault is it Anyway???? What are illegitimate debts? Illegitimate debts can be defined as debts that have not benefited the people of the countries who were given them. The concept of illegitimate debt examines the role of the lender. It questions whether the lender should have given the loan in the first place. Debt and Development Coalition Ireland argues that vast amounts of the remaining debts currently owed by impoverished countries should not have been given as they did not benefit the people of those countries in any way. This is because many of these loans were often given: For useless projects which failed or never even got started. To corrupt political leaders who stole the money or used it to oppress their people. On unfair terms, with very damaging conditions attached to the loan We argue that if the lender should not have given a loan, the lender has no right to try to try to collect the loan. So are all debts illegitimate? Are there any loans which have benefited the people in the countries that received them? Not all debts are necessarily illegitimate. Some loans accepted by impoverished countries may have benefited the people of those countries. That is why we support the call of Jubilee South (a network of Southern debt cancellation campaigns) for people in South countries to carry out 'debt audits' in order to establish which loans their governments should repay and which loans they should not repay. This is why we are calling on the Irish government to support a public inquiry into the debts owed to the World Bank and the IMF. But are governments in impoverished countries not responsible for the loans that they take themselves? Why should we blame the lender? There are two levels of responsibilities when it comes to giving and receiving a loan: Borrowing governments: should only take loans that they can afford to repay and that will be of benefit to the people of the borrowing country. Lenders: should not give loans based on unfair terms. They should not give loans with political and economic conditions attached. They should not give loans for activities that will not benefit the people of the borrowing country. Lenders should not pressure impoverished countries in any way to accept loans that they may not want, or will be unable to repay. Action is needed in the North and in the South: Social justice activists in impoverished countries are working to hold their own governments to account for the loans which they accept on their behalf. We, as activists in the enriched world, must work to ensure that our governments cancel all illegitimate debts and stop lending irresponsibly to impoverished countries. Are there any circumstances where a lender has recognised a loan it has given as illegitimate? No government lender has thus far recognised a loan as being illegitimate. BUT, in 2006, the Norwegian government cancelled debts owed to it by 5 countries in the Global South worth US$ 78 million. The Norwegian government said that they had a "shared responsibility" with the borrower for the bad debts which resulted from giving these loans. This represents a ground-breaking acknowledgement from within the lending community that lenders should be held accountable for providing irresponsible loans. What should the Irish government do to bring about the cancellation of illegitimate debts? The Irish government should: Publicly recognise the concept of illegitimate debts and call for the cancellation of illegitimate debts. Call for a public inquiry into World Bank and IMF loans. In addition to this, the Irish government should: Call for a UN definition of illegitimate debts. Work to ensure responsible future lending practices at the World Bank and IMF in order to ensure that another debt crisis does not occur again. What can I do to work for the cancellation of illegitimate debts? You can contact your local T.D. and ask her / him to raise this matter in the Dáil especially in advance of World Bank and IMF meetings. You can write to the Minister for Finance, the Minister for Foreign Affairs and the Minister for Development Co-operation and Human Rights and ask them to take these important steps.

Click here for this fact sheet in microsoft word (.doc) format

FOCUS - ARTICLES ON ILLEGITIMATE DEBT

Jubilee South’s Response to the G8 Debt Proposal: Justice Demands Unconditional and Total Debt Cancellation for All South Countries! click here PDF

Also read: Jubilee South’s Response to the G8 Debt Proposal:
Justice Demands Unconditional and Total Debt Cancellation for All South Countries!
click here PDF

Useful Websites:
www.africaaction.org/newsroom
www.jubileeplus.org
www.odiousdebts.org