By Wadi'h Halabi
Thousands of demonstrators in Washington this week will be adding their voices to the jubilee 2000 movement. This worldwide movement calls for canceling the unpayable debt of the poorest countries. What is behind the debt crisis, and what is the way out? On whose terms will it be resolved?
Jubilee 2000 estimates that the world's 52 poorest countries, with a total population of 1 billion, alone owe an average of $354 per person. Debt service commonly consumes more than the education or health budgets of these countries, and in some cases, such as Rwanda, more than both combined. Despite massive payments to lenders, the debt burden continues to grow.
Worse yet, income in these countries is falling, not rising, from the pitiful average of barely $300 a year. The economic historian Angus Maddison has estimated that in 144 capitalist countries, income per person declined almost one percent per year between 1973 and 1998. Per capita income in Nigeria fell from $1,000 in the early '80s to $300 in 1998.
The phenomenon of debt outgrowing economy and income is not limited to the poorest countries. Between 1990 and 1999, the Japanese government's debt rose over 100 percent while the economy remained stagnant or fell in recession. This debt is now much larger than Japan's entire economy, and rising rapidly, while the Japanese economy is in recession.
The U.S. economy is in its longest expansion ever. But total debt owed by households and businesses grew at least 11.7 percent last year, more than twice as fast as the economy as a whole, four times the growth in wages. One third of poor households in the U.S. spent 40 percent of their incomes on debt payments last year. With housing commonly devouring another 50 percent of income, can hunger and homelessness be far behind?
The fundamental cause
What is behind this phenomenon? The answer may be surprising to some. In the last analysis, the problem is that there is "too much" food, "too much" steel, "too much" of practically every commodity on world markets, indeed "too much" capital. Of course the 'too much" is entirely from the point of view of the capitalist class and their calculation of profitability. "In virtually every sector across [Asia]," reported the investor-oriented Far Eastern Economic Review in 1998, "The same intractable equation applies: Supply far outstrips demand. Basic materials, steel, cars, petrochemicals, semiconductors, the list [of excess commodities] rolls on." The Review called for "jettisoning the excess capacity."
The opposite is true for workers and oppressed people around the world: there is not enough food, fuel, housing, education, healthcare. Behind the "overproduction" (for capitalists) and misery (for workers) lies the anarchy of capitalism. What is happening is a breakdown in the necessary balance both among the inputs that go into production, and between production and the effective demand of producers as well as consumers. Breakdowns such as this are ultimately behind capitalism's unending boom-bust cycles.
For lenders, however, debts must be repaid, even if production for which they lent capital cannot be profitable because of gluts in the market, even if millions of indebted people have suffered wage cuts or job losses because of capitalism's gluts. Unemployment worldwide nearly doubled between 1989 and 1996, and now criminally afflicts over a billion people.
The imbalances in the world economy are mounting. Debt is outgrowing economy and income. As a result, it is virtually guaranteed that most of the trillions (thousands of billions) of dollars in outstanding debt today worldwide will never be repaid.
The real question now is, On whose terms will the debt be canceled, the working class' or the capitalists'?
The capitalists' condition for forgiving the debt - through the IMF, the World Bank, or in bilateral negotiations - call for privatization, cheaper labor, more unemployment, cuts in education and health care, and destruction and idling of "overproduced" manufacturing and agricultural capacity. These are the kind of conditions that the U.S., Britain, and the International Monetary Fund have in mind when they agree to cancel some of the debt.
The working class in the U.S. - and worldwide - has no interest at all in cheaper labor, greater unemployment, homelessness or hunger anywhere in the world. Working class terms for canceling the debt would therefore call for repudiation of the debt without condition, and for redirecting "excess capacity" and all resources to reconstruct the economy, achieve real social and economic equality in the world, and meet pressing human needs. People before profits