New Debt Crisis

0 Comment(s) | Posted | by Peter Knox |

It’s like 2000 all over again:

Many African countries are entering more and more heavily into debt owed to other nations. The difference is that now it is China buying the future of our children. Now it is China extending loans and ‘aid’ equivalent to US$ 60 billion to Africa. Now it is China receiving opprobrium for predatory lending, from our former colonial masters who are on their moral high horses. Now China is perceived as the threat to Western interests because of its “carefully laid debt trap” in Africa. Now our peoples will be stuck in cycles of odious debt to China. Now we will be begging for relief, ‘amnesty’, jubilee from China rather than from the West.

And frankly, to our people, I don’t think it will feel any different, as we lose control of our natural assets, our ports and airports, our economic priorities, our human development goals. We are warned that the Confucian ethic is less benign and forgiving than the ethic of our former Christian overlords. This may or may not be. There might or might not be token interest cancellations. But isn’t it just a matter of the degree of grinding poverty to which our people will be subject when the loans become due and the payments have to be made? Slavery is still slavery.

We have recently read about Sri Lanka ceding control of its port, because of defaulting on loan repayments. China now has a foothold in the Indian Ocean. Zambia is denying having talks about swapping debt for public assets like the international airport, the state broadcaster, and the electricity utility. But there’s no smoke without fire… Cyril Ramaphosa of South Africa has recently negotiated a multi-billion loan for South Africa, to “stimulate the economy.” Haven’t we seen this all before?

As the year 2000 was approaching, many churches, including the Catholic Church led the Jubilee movement, which aimed to reduce the debt burden of heavily indebted poor countries (HIPCs). There was talk of debt forgiveness, of odious debt, of greater financial outflows from Africa (in particular) in servicing foreign debt than financial inflows in foreign aid. NGOs and humanitarian agencies were lobbying (often successfully) arguing that in some cases the initial capital had actually been repaid several times over, but that eternal interest payments were keeping the countries in the debt cycle.

In the honeymoon period after independence, many inexperienced leaders committed their countries to loan agreements, in order to buy the things their countries needed: big black cars, military materiel, lavish palaces, presidential residences, prestigious universities, white elephants. Now, in the 2000’s, China is helping us to build roads and railways to replace those neglected over the decades since independence, to buy bigger, bulkier black gas guzzlers, and to invest in more prestigious white elephant projects. 

It seems that our leaders understand little about loans, to say nothing of interest and compound interest. You see, in Africa, at least in our village mentality, when we say “lend me” we really mean “give me.” If you have more than you need, you are morally bound to let me have what I need. Sharing is a way of life, and it is bad form to ask for the repayment of a loan. Despite that African communalism, some of our citizens manage to accumulate vast wealth.

And of those leaders who do understand the world’s financial systems, perhaps they don’t mind that they are committing their people to decades of debt servitude. They will probably be out of office when the payments become due, and still living off the fat of the land. This is morally culpable behaviour. No less culpable are those who lend money to our leaders, knowing full well that the terms of payment will not be met. Our appeal to countries and agencies willing to loan money: Please don’t! Keep your Dollars, Yuan, Francs, Euros, Yens and Pounds to yourselves…. unless you are making an outright gift.

 

In Laudato Si’ 52 Pope Francis links the issues of foreign debt and ecological debt. The developing world has immense capacity to absorb the excessive environmental burden placed on the planet by the richer countries. If biosphere services of our forests were assigned their true finacial value of sequestering carbon dioxide, then perhaps they could help to pay some of the foreign debt. Our developing countries should thus be more proactive in keeping our forests in the ground, rather than selling them off. But that’s another whole paper…..

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