Third World Debt Undermines Development, G8 Summit 2005

3 July 2005Globalissues.org Anup Shah

For July 2005, UK hosts the annual G8 Summit. The G8 is comprised of the world’s leading industrialised nations (Britain, Canada, France, Germany, Italy, Japan, United States, plus Russia).

The lead up to the Summit has seen a lot of excitement from development and environmental groups. Pressure seems to have succeeded to get these most powerful nations to discuss various issues such as:

Africa (debt, unequal/unfair trade) Climate change

Table of contents for this page

This web page has the following sub-sections:

Do promises to alleviate third world debt mean much?How good has Aid from Rich Countries been in recent years?100% Debt Write Off is Not for ALL the Poorest Countries;G8: Meet our demands or else Economic Conditions are the Controversial Ones Such conditionalities are undemocratically imposed Conditions That Are Less Discussed Conditions promote unequal trade If these conditions are unfair, why are they still pursued?$40 billion write off is not a historic breakthrough It is not really $40 billion but $15 in net present value Other costs associated with this proposal G8 on Climate Change What has third world debt got to do with climate change?Leaked drafts show G8 leaders not doing much about climate change Mainstream media coverage of the G8 buildup and Summit Portraying G8 Leaders as Saviors Bush exaggerates claims of trippling aid to Sub-Sahara Africa Headlines do not reveal any criticims of G8 proposals Live 8 and Protests Presenting G8 Leaders as Saviors, Not Mentioning Their Role In Poverty and Debt Live 8 Not Having Enough African Musicians Geldof tells artists not to criticize Bush and Blair Geldof’s Gamble May Yet Work Repeating past mistakes?Small concessions are not the full deal; they are only the beginning

Do promises to alleviate third world debt mean much?

Recently, G7 countries (G8 minus Russia) offered a deal of $40 billion cancellation of third world debt, praised as a “historic breakthrough” by some mainstream media outlets. Bob Geldof said it was “a victory for the millions of people in the campaigns around the world” and Bono called it “a little piece of history”.

While this is very encouraging, there are some concerns.

Getting these world leaders to talk about these issues is one thing. What about the substance and what will actually be discussed? In the past, there have been many headline-grabbing promises by world leaders for third world debt cancellation or relief for the poorest and most ravaged countries, and yet those past promises have hardly been kept1. For example:

The debt cancellation doesn’t actually happen; The debt cancellation is very slow to happen; The amount of money or cancellation promised is actually far less due to fancy spin and adding in money that has already been earmarked for this purpose

For poor countries, third world debt is a crucial issue. Crippling third world debt kills:

Rich countries have pressured these poor countries to sacrifice health and education spending and prioritize on debt repayment; Rich countries have protected their agricultural markets while forcing poor countries to open theirs, leading to dumping and flooding of products, driving local people out of businesses and livelihoods. For rich countries, the debt figures involved are tiny; For poor countries, these same figures are a matter of life and death: Extrapolating from UNICEF data, as many as 5,000,000 children and vulnerable adults may have lost their lives in sub-Sharan Africa2 as a result of the debt crunch since the late 1980s. The United Nations fears another 3 million children will die in the poorest countries of sub-Saharan Africa by 20153, the target for the Millenium Development Goals to cut poverty by half. Some 11 million children die each year around the world4, not just Africa, due to similar conditions of poverty and debt. These statistics typically define childeren as those under the age of five. What about 6, or 7, for example?

(See the third world debt5 section on this site for more details.)

Note that this cancellation offer is a proposal only. It still has to go through the IMF and World Bank, and donors outside of the G7 will need to agree to this as well. However, given the high profile this proposal has received, it is worth looking at it in some depth because of a number of serious issues such as:

Some of the conditions tied to the proposals may be questionable The write-off is not as “historic” as the mainstream would like us to believe.

How good has Aid from Rich Countries been in recent years?

As detailed on this site's Foreign Aid6 section, aid from rich countries to poor countries has been lacking, despite common perceptions of huge amounts in donations:

Rich countries promised 0.7% of their GNI in aid to poor countries; most do not give anywhere near that amount, so for years, poor countries have lost out on billions Aid is often tied to unfair conditions such as buying from the donor, or opening up markets to foreign multinationals (from those rich countries), thus making what little aid is given to be even less useful More money is transferred from poor countries to rich Aid amounts are dwarfed by the effects of first world subsidies, third world debt, unequal trade, etc

Ironically, in the Cold War past, when aid flows were higher, they didn’t help Africa much, due to the above reasons, as well as keeping supported dictators in power. (Under such conditions of misery, no wonder corruption rose.)

In that context, $40 billion dollars write-off is quite small, and is accompanied by unfair conditions/demands, and political propaganda/spin that makes this appear to be a historic deal.

100% Debt Write Off is Not for ALL the Poorest Countries;

Short, attention-grabbing headlines have said that 100% debt relief write-off is proposed for the world’s poorest countries. But what is lost in this sound-byte is that it is not all the world’s poorest countries; only those that have jumped through all the hoops and barriers demanded of them.

Consider the following (with sources on this site's Scale of the Debt Crisis7 section):

In 1970, the world’s poorest countries (roughly 60 countries classified as low-income by the World Bank), owed $25 billion in debt. By 2002, this was $523 billion For Africa, In 1970, it was just under $11 billion By 2002, that was over half, to $295 billion Debts owed to the multilateral institutions such as the IMF and World Bank is currently around $153 billion For the poorest countries debts to multilateral institutions is around $70 billion.

$550 billion has been paid in both principal and interest over the last three decades, on $540bn of loans, and yet there is still a $523 billion dollar debt burden.

How does $40 billion imply 100% debt relief to multilateral institutions when debt for the poorest countries to these institutions is $70 billion? The answer is that not all the poorest countries actually receive the proposed debt relief:

The “poorest” countries usually referred to are the lowest income countries that are part of the HIPC initiative; It is these countries that account for the $70 billion debt to multilateral institutions; The $40 is because the proposal is debt relief only to those countries that have reached “completion point” in the HIPC process; The total for the 18 countries at that point is around $40 billion.

This debt write-off proposal is therefore reinforcing the condition that poor countries must first go through the HIPC initiative that has been heavily criticized for failing the poor8, if they wish to see debt relief.

One positive point that should also be mentioned is that the G8 proposal at least talks about multilateral debt, and not just bilateral and private debts. As Eurodad explains,

Multilateral debt is almost always serviced because the international financial institutions enjoy “preferred creditor” status. This is because a default on a multilateral debt obligation is likely to result in a country being cut off completely from international credit from any official or private source. This is different from the debt owed to bilateral and private sector creditors, significant proportions of which are in arrears, i.e. not serviced regularly. Cancellation of bilateral and private sector debt may therefore represent simply a paper transaction involving the cancellation of debt that was not being repaid in the first place. Such a transaction, while effective in reducing the overall debt overhang, may not actually free up any resources for investments in poverty reduction and infrastructure in a country.

... most HIPC debt stock reduction [over 80%] to date has come in the form of writing off debt already in arrears.

The cancellation of multilateral debt on the other hand, almost always means that money that would otherwise have gone into servicing debt becomes available to spend instead on development. It also reduces debt overhang at the same time. Research has shown that it is also the most efficient form of resource delivery to countries in need.

— Sony Kappor, Paying for 100% Multilateral Debt Cancellation; Current proposals explained9, European Network on Debt and Development, January, 2005, p.5 (link is to a PDF formatted document)

For those wondering why so much of the promised debt relief (when it has actually been delivered) in the past has not improved anything, the above provides the answer.

So, a reasonable sounding debt write-off is on the table, but what strings are attached?

G8: Meet our demands or else

If it has already taken decades to get to this point of debt relief proposals — despite years of public outcry and protests on issues such as third world debt — is it possible that rich countries will commit to a positive step in a substantial way now? Many will understanably be skeptical. Yet, on the other hand, the highly publicized Make Poverty History10 campaign and the related Live 8 concerts11 may help make a difference. Political arousal resulting from the unpopular war on Iraq12 may yet still help pressure governments this time to act on their pledges.

When asked by the media if money is just going to be given away, to potentially corrupt leaders, the basic response is that there will be important conditions related to better governance, and sometimes there is mention of economic “reform”. But the media doesn’t usually have time (or sometimes, it seems, inclination) to explore this in much more depth.

Economic Conditions are the Controversial Ones

Conditions mean different things to different people. By and large most will think of these conditions being things like improving democracy, strengthening various institutions, reducing or cracking down on corruption, and so forth. And governance issues need to be continually addressed. Even though many African countries are making progress and are not as corrupt as stereotypicical media reporting and political soundbites would like us to believe, it is not close to being fully addressed (within Africa and outside Africa, too.)

But, what is usually regarded as conditions by the G7 are economic ones: trade liberalization, privatization, and lowering barriers to trade through pursuit of neoliberal ideology13. These have been enforced upon poorer countries in the past, through structural adjustment programs14 that have been devastating for the poor.

And indeed for this debt cancellation, this is what is included. The World Bank notes that “to meet the good governance standard, the G8 want recipient nations to cut corruption, tackle fraud, free up their economies and liberalize trade15.” These four things sound fair, end even. Yet, the last two, freeing up economies and liberalize trade — in the way that neoliberal ideology requires, and the way rich, powerful country manipulate the terms of trade — are the same policies that have created such poverty for Africa and elsewhere in the first place.

In addition, the UK is attempting to get the rest of Europe (rather unsuccessfully) to stop subsidizing its Common Agricultural Policy which itself is hypocritical and denies market access for many African producers. At the same time though, poorer countries that open up their own markets will find it difficult to survive the competition of much larger and wealthier companies typcially from these G7 countries (which could hint as to why there is so much emphasis on debt reduction at this G8 Summit.)

A blanket or vague approach of simply opening market access may also mean that poorer African countries may suffer even more, while it is not clear if the wealthier African countries will be able to compete in all areas against others, such as from Europe. For example, some countries that currently benefit from much-needed preferential access would likely lose out. (It could be argued that preferential access distorts trade just as subsidies do, so to address this more care needs to be taken, and trade liberalization, if desired, cannot be rushed.)

The G8 hints that it recognizes some of these issues. However, the G8 is still urging steps be taken to ensure that they eventually are ready to implement neoliberalism. This implies that those countries considering a slightly different economic policy deemed as best for their own country, will likely not get any assistance.

Such conditionalities are undemocratically imposed

Jubilee Research, the successor to the famous Jubilee 2000 debt cancellation campaign organization, notes that

All the countries currently under consideration [for this debt write-off] are already within the HIPC initiative [to help write off debts], and the acceptance of IMF economic policy programmes, typically carrying harmful and undemocratic policy conditions, is a requirement for entry into this scheme.... the new deal will do nothing to restore economic autonomy to these developing country governments.

— G8 Debt Relief Proposals; A first step in the right direction — and a long way to go16, Jubilee Research, June 14, 2005 (Emphasis Added)

Award-winning journalist, John Pilger, holds little back and describes the “victory” as a “fraud”:

In summit after summit, not a single significant “promise” of the G8 has been kept, and the “victory for millions” is no different. It is a fraud — actually a setback to reducing poverty in Africa. Entirely conditional on vicious, discredited economic programmes imposed by the World Bank and the IMF, the “package” will ensure that the “chosen” countries slip deeper into poverty.

— John Pilger, The G8 Summit: A Fraud and a Circus17, New Statesman, June 22, 2005

Conditions That Are Less Discussed

One condition that is hardly ever heard from the G8 is that poor countries reduce their military spending and stop purchasing weapons, especially small arms. One possible reason why we might not hear this is that the G8 are the world’s leading suppliers of arms18 and that the arms trade is the world’s biggest business19.

Neither is corruption from the G8 countries:

British companies are among the worst [bribery] offenders. Some 37 of the 55 companies which the World Bank publicly blacklists and has disbarred from participating in its contracts because of evidence of corruption are domiciled in Britain. Transparency International, which publishes a “bribe-payers’ survey”, based on perceptions by business executives and professionals in the third world of how foreign companies behave, confirms that bribes are most common in the arms trade, public works and big infrastructure projects. British companies are among the strongest players in all these sectors.

— Jonathan Steele, Corruption in the third world is our problem20, The Guardian, December 13, 2000

The above article is no doubt a bit old, but the problem still continues. See for example, the Transparency International Bribe Payers Index 200221, which is their latest report on this.

Conditions promote unequal trade

For a previous G8 Summit in June 2002, a briefing had been prepared by Action for Southern Africa and the World Development Movement, looking at the wider issue of economic and political problems:

It is undeniable that there has been poor governance, corruption and mismanagement in Africa. However, the briefing reveals the context — the legacy of colonialism, the support of the G8 for repressive regimes in the Cold War, the creation of the debt trap, the massive failure of Structural Adjustment Programmes imposed by the IMF and World Bank and the deeply unfair rules on international trade. The role of the G8 in creating the conditions for Africa’s crisis cannot be denied. Its overriding responsibility must be to put its own house in order, and to end the unjust policies that are inhibiting Africa’s development.

— It’s the Blame the Victim Summit22, Action for Southern Africa, June 25, 2002. Also see the full briefing (PDF format)23.

As the above briefing is titled, a common theme on these issues (around the world) has been to “blame the victim”. The above briefing also highlights some common “myths” often used to highlight such aspects, including (and quoting):

Africa has received increasing amounts of aid over the years — in fact, aid to Sub-Saharan Africa fell by 48% over the 1990s Africa needs to integrate more into the global economy — in fact, trade accounts for larger proportion of Africa’s income than of the G8 Economic reform will generate new foreign investment — in fact, investment to Africa has fallen since they opened up their economies Bad governance has caused Africa’s poverty — in fact, according to the UN Conference on Trade and Development (UNCTAD), economic conditions imposed by the IMF and the World Bank were the dominant influence on economic policy in the two decades to 2000, a period in which Africa’s income per head fell by 10% and income of the poorest 20% of people fell by 2% per year

Christian Aid weighs in on this with a more recent report noting that sub-Saharan Africa is a massive $272 billion worse off because of free trade policies forced on them as a condition of receiving aid and debt relief.24 They also note that:

The reforms that rich countries forced on Africa were supposed to boost economic growth. However, the reality is that imports increased massively while exports went up only slightly. The growth in exports only partially compensated African producers for the loss of local markets and they were left worse off.

— The economics of failure: The real cost of ‘free’ trade'25, Christian Aid, June 20, 2005

The type of trade is important. As detailed on this site’s Structural Adjustment26 section, poor countries have often been forced to concentrate on a few exports, rather than diversifying their economies. Just as biodiversity is important27 to ensure resilience to whatever nature can throw at a given ecosystem, diverse economies can help countries weather economic storms. Matthew Lockwood is worth quoting:

What Africa needs is to shake off its dependence on primary commodity exports, a problem underlying not only its marginalisation from world trade but also its chronic debt problems. Many countries rely today on as narrow a range of agricultural and mineral products as they did 30 years ago, and suffer the consequences of inexorably declining export earnings. Again, the campaigners’ remedy — to improve market access for African exports to Europe and America — is wide of the mark.

— Matthew Lockwood, We must breed tigers in Africa28, The Guardian, June 24, 2005

Asia too has seen development where policies counter to neoliberalism have been followed, as Lockwood also notes:

A large number of studies have shown that strong states with a long-term economic growth strategy were at the centre of the Asian miracle. Counter to donor orthodoxy, these so-called “developmental states” were thoroughly dirigiste, intervening widely in their economies. They committed practically every sin in the neoliberal book, including state-owned industries and trade protection.

— Matthew Lockwood, We must breed tigers in Africa29, The Guardian, June 24, 2005

What Lockwood did not mention was that today’s wealthy countries also developed by not following neoliberal policies:

That current free trade is just as unequal as the mercantilist trade it replaced is easily demonstrated. The structural adjustments imposed upon weak nations as necessary for free trade are the opposite policies under which every successful nation developed. Virtually every nation successfully developing did so under Friedrich List’s philosophy of protection of tender new industries and markets. That they developed under the philosophies of Adam Smith is a myth designed to hide a continuation of plunder through unequal trades.

— J.W. Smith, Economic Democracy; The Political Struggle for the 21st Century30, (4th Edition, 2005), pp.7-8

If these conditions are unfair, why are they still pursued?

And yet, the conditions imposed on the poorer countries are still demanded. Why if there is a chance that so much poverty, misery, corruption, and even death, may result? George Monbiot offers an answer:

... that the conditions our governments impose help to prevent corruption is laughable. To qualify for World Bank funding, our model client Uganda was forced to privatise most of its state-owned companies before it had any means of regulating their sale. A sell-off that should have raised $500m for the Ugandan exchequer instead raised $2m. The rest was nicked by government officials. Unchastened, the World Bank insisted that — to qualify for the debt-relief programme the G8 has now extended — the Ugandan government sell off its water supplies, agricultural services and commercial bank, again with minimal regulation.

And here we meet the real problem with the G8’s conditionalities. They do not stop at pretending to prevent corruption, but intrude into every aspect of sovereign government. When the finance ministers say “good governance” and “eliminating impediments to private investment”, what they mean is commercialisation, privatisation and the liberalisation of trade and capital flows. And what this means is new opportunities for western money.

...To stave off a possible revolution [after the IMF and World Bank forced Uganda to impose “user fees” for health and education], [President] Museveni reinstated free primary education in 1997 and free basic healthcare in 2001. Enrolment in primary school leapt ... and ... outpatients almost doubled. The World Bank and the IMF — which the G8 nations control — were furious.... the head of the [World] bank’s delegation made it clear [in 2001] that ... he now saw the health ministry as a “bad investment”.

There is an obvious conflict of interest in this relationship. The G8 governments ... have a powerful commercial incentive to ensure that [poor countries] compete unsuccessfully, and that our companies can grab their public services and obtain their commodities at rock-bottom prices. The conditionalities we impose on the poor nations keep them on a short leash.

Attaching conditions like these to aid is bad enough. It amounts to saying: “We will give you a trickle of money if you give us the crown jewels.” Attaching them to debt relief is in a different moral league: “We will stop punching you in the face if you give us the crown jewels.” The G8’s plan for saving Africa is little better than an extortion racket.

— George Monbiot, A Truckload Of Nonsense; The G8 Plan To Save Africa Comes With Conditions That Make It Little More Than An Extortion Racket31, The Guardian, June 14, 2005 (Emphasis Added)

Given some of these issues and accompanying “myths” are, in effect, being regurgitated for 2005, this casts further doubt on whether the write off is “historic” or not.

$40 billion write off is not a “historic breakthrough”

This debt cancellation guesture can only been seen as one small positive step to help rectify past mistakes (rather than praise it as some historic breakthrough). In fact, some may regard the phrase “historic” quite offensive here, given that historically these same rich countries have helped exacerbate and even create these conditions in the first place32.

Note that the $40 billion is very small compared to the military expenditure of G8 countries (totalling almost $646 billion in 2003 alone, or $581 if Russia is not included). Furthermore, as Jubilee South notes, while the military spending figures are per year, the debt cancellation will be spread over the duration of repayment of the cancelled loans, such that per year, annual contributions from rich countries are expected to be about $1 billion.

Jubilee Research is equally guarded in its optimisim from these latest promises. They note that the $40 billion debt cancellation proposal “remains a wholly inadequate response to the demands made by NGOs and civil society debt campaigners for a total cancellation of unsustainable debt.” (Emphasis added). In addition:

Until a fundamental reform of international finance and trade is undertaken, debt cancellation — though necessary in the short term — can only address the symptoms and not the cause of chronic poverty in the developing world. In the absence of such comprehensive changes, the high hopes of debt campaigners will ultimately be disappointed.

... The write off for the initial 18 countries will cover $40bn (£22bn) of debts owed to the World Bank, the African Development Bank and the IMF.... This will cost rich countries ... only 1.5 pence [about 2.8 cents] per person per week in developed countries, and represents around 5 pence [about 9 cents] per head to the populations of the 18 developing countries concerned. Since the per capital GDP for the G7 countries for 2002 stood at $29,872 and that for low income countries at $430, this does not seem a very significant contribution; indeed, it represents less than 1% of the annual shortfall from the 0.7% of GNI for development aid promised by rich countries to the developing world.

— G8 Debt Relief Proposals; A first step in the right direction — and a long way to go33, Jubilee Research, June 14, 2005 (Emphasis Added)

It is not really $40 billion but $15 in net present value

A number of NGOs and other organizations such as Jubilee Research, mentioned above, point to a number of other serious concerns. Eurodad provides a useful summary of a number of those issues, reproduced in this table (all emphasis is original):

Issue	Fact
Source: Devilish details: Implications of the G7 debt deal34, Eurodad, June 16, 2005 (follow link to see full PDF formatted brief which contains the above table.)
Number of Southern countries covered	Only 18 countries are covered, potentially rising to 27 over the next two years. There are many more low-income and middle-income countries who need partial or 100% debt cancellation.
On average the 18 eligible countries will save US$1 billion each year over the next ten years in debt service	This deal therefore cancels only 10% of the debts that need to be cancelled. The 62 countries that need 100% debt cancellation to achieve the MDGs by 2015 pay over US$10 billion in debt service to the multilaterals per year.
Claim of “US$40 billion cancellation” deal	The deal is worth US$40 billion in nominal terms, but will be delivered over a 40 year time-period. The Net Present Value of the deal is US$17 billion.
Net gain for poor countries	Countries will receive a dollar for dollar reduction in IDA flows equivalent to the amount cancelled. They will then receive new money on the basis of policy performance. This reinforces harmful WB/IMF conditionality and for poor performers will result in no net gain from this deal.
Rich countries cancelled US$30 billion in debt owed by Iraq in 2004	This was more in one day than has been delivered to the whole of the African Continent over the last 10 years.

Other costs associated with this proposal

In addition to the above,

The debts owed to the rich countries themselves are not included Debt write-off is described by Jubilee Research as a matter of justice because of the “responsibility rich creditors carry for creating and perpetuating the debt crises in developing countries35.” The underlying harmful and unfair economic conditions attached to debt relief are still in place, as mentioned further above.

John Pilger, mentioned above, also adds a few points “unmentionable” by the establishment and mainstream media:

... Blair and Brown want the IMF to pay its share of the “relief” by revaluing its vast stock of gold, and passionate and sincere Bush has said no. The first unmentionable is that the gold was plundered originally from Africa. The second unmentionable is that debt payments are due to rise sharply from next year, more than doubling by 2015. This will mean not “victory for millions”, but death for millions.

At present, for every 1 dollar of “aid” to Africa, 3 dollars are taken out by western banks, institutions and governments, and that does not account for the repatriated profit of transnational corporations.

— John Pilger, The G8 Summit: A Fraud and a Circus36, New Statesman, June 22, 2005

It is suggested that another 20 countries may be eligible for debt write off for debts owed to the same insitutions (but not individual countries) if they meet strick targets for “good governance” and tackling corruption. This would increase the total write off to $55 billion. This implies that for the first 18 countries, on average, from the $44 billion they get about $1.44 billion each. For the additional 20 countries sharing the extra $15 billion, that is $0.75 billion each on average, presumably also spread over a number of years. Most countries pay more on debt repayments each year. This “write off” is only to a small number of institutions, so it is not “historic”.

Jubilee South, mentioned earlier, is an internationl coalition of NGOs, movements, and communities from all over the South (or Third World). Jubilee South is extremely critical of the latest G8 proposals for a number of reasons and expands on some of the reasons mentioned above:

“The multilateral debt cancellation being proposed is still clearly tied to compliance with conditionalities which exacerbate poverty, open our countries further for exploitation and plunder, and perpetuate the domination of the South.” “Even if the debt cancellation were without conditionalities, the proposal falls far too short in terms of coverage and amounts to demonstrate a bold step towards justice by any standard” because It does not cover the debts claimed by the Inter-American Bank and the Asian Development Bank By being silent on the rest of the South (which totals about 160 nations), the G8 continues to perpetuate their self-serving myth that debt is a problem only for “the most impoverished” countries Other critical areas, such as the 2004 tsunami-hit regions, are not included The total amounts of debt cancellation are actually very small, per year (as also mentioned further above, when compared to military spending, for example) “The proposal does not address the issue of odious and onerous debts” as “most if not all debts claimed from the South are patently illegitimate” many “shown to be outrightly illegal.” “The G8 statement does not express any measure of acknowledgment of the historical and structural causes of debt and poverty and their own culpability. Without this recognition, the G8 governments cannot make poverty history. Instead, the G8 statement is a re-affirmation of their collective commitment to push poverty-inducing and debt-creating policies in the South.”

Jubilee South concludes:

It is also notable that debts claimed by the IMF are included, an official recognition that IMF debts can be cancelled after years of rejecting this notion. The fact that the G8 governments have been forced to address the sham and inadequacy of their various debt relief schemes would not have been possible if it were not for the unceasing and tireless efforts of debt campaigns and social movements across the world.

But we must not lose sight of the over-all nature and impact of these agreements. The G8 debt agreement is a clever effort to use positive elements to project an image of generosity, but embeds these elements in a package that is firmly consistent with and in furtherance of their economic agenda and control over the South.

— Justice Demands Unconditional and Total Debt Cancellation for All South Countries!37, Jubilee South, June 21, 2005

Noted above by Jubilee Research is how this debt relief amounts to less that 1% of the annual shortfall from the 0.7% of GNI for development aid promised by rich countries. As has been written on this site at some length, if this promised amount of aid38 was delivered in full many years ago and sustained, some of the problems of today may not have been as severe. It further highlights how disgraceful it is to say that the $40 billion write off is a “historic breakthrough.”

G8 on Climate Change

What has third world debt got to do with climate change?

If third world debt has been a serious problem and threat for the poor countries (where the vast majority of the world’s population live), then climate change has an even bigger impact.

Gains from development could be lost due to the immense problems climate change will bring.

Leaked drafts show G8 leaders not doing much about climate change

Leaked drafts on the current stage of negotiations regarding the position of the G8 countries in the build-up to the Summit show that people are justified to be immensely concerned:

BBC’s Newsnight program which aired on Thursday 16th June revealed a number of important issues concerning a 2nd leak on the climate change text for the G8 Heads of State to sign up to at the end of July, when they meet.

The text, a journalist reported, “has been watered down” and there is so little in there in terms of substantial actions because there has been “such strong US influence on the text, that the industrialized nations may even be going backwards from any kind of international concensus on climate change.”

The first draft at the end of May itself was criticized for it omitted targets and timetables on cutting CO2 emmissions. The second, by comparison, is even “leaner and meaner,” with the differences being really stark:

There is no new money whatsoever for addressing climate change The first draft had a few things (though no figures) mentioned, such as: new energy projects incentives to get other countries on board through tax breaks for example encouraging innovation through rewards

Now, all that is gone.

The G8 countries appear not to even be agreed on the science because of “very heavy, heavy exertion by the Americans.”

Inter Press Service also reported on this, and is quoted at length:

In the new draft, the very first line is contentious. The opening words “Our world is warming” have been placed in parentheses, indicating there is no consensus on that portion of the text. Here the draft has been clearly prepared by the British government, and the dispute is believed to arise from U.S. objections.

The first paragraph includes the following also placed in parentheses: “The statement issued by the science academies in June 2005 said that there is now ‘strong evidence that significant global warming is occurring’ and that ‘this warming has already led to changes in the Earth’s climate’. We know that the increase is due in part to human activity.”

The brackets around the above text indicate that there is no consensus among the G8 countries that any significant climate change is taking place that may be linked to human activity.

...

There seems to be no dispute around general statements such as an agreement to “act with resolve and urgency now to meet our shared and multiple objectives of reducing greenhouse gas emissions, improving the global environment, enhancing energy security and cutting air pollution in conjunction with our vigorous efforts to reduce poverty.”

But then the parentheses indicating a lack of agreement appears around the following: “The world’s developed countries have a responsibility to show leadership.”

Nor is there agreement on the following in the draft text: “While there will always be some uncertainty, inertia in the climate system means we cannot afford to postpone action if we are to manage the risk of major irreversible change.”

— Sanjay Suri, Further Retreat from Tackling Climate Change39, Inter Press Service, June 16, 2005 (Emphasis Added)

The Observer newspaper in the UK also added more explicitly that it was the United States moving to spoil the climate accord40.

So, not only is there contention but the rich nations do not see it as their responsibility to show leadership, yet (representing a minority percentage of the world’s population) they have historically (and currently) emitted most of the greenhouse gases41 that have caused the rapid climate change.

Instead of seeing linkages between these two issues, the BBC journalist also noted that the G8 governments seem to want to create trade-offs between the Africa/debt issue and climate change; that you can have one or the other, or make sacrifices in one for advances in the other.

Quite frankly, the silliness in this is in how little the amount of money required actually is. It is not lack of money to get this done, it is political will and geopolitics. At the same time, this risks lives and perhaps the future of the planet.

A concern with the orginal Kyoto negotions was that the Kyoto Protocol was watered down to get the US on board, who then pulled out anyway42, leaving the rest of the rich countries trying to reach weak targets (and still failing). Concerns raised by some environmental groups for the G8 Summit (as noted by the Guardian is that any new agreements might get watered down in order to get US buy in43. Which is worse, that, or a deal that would then need to by-pass the US?

Mainstream media coverage of the G8 buildup and Summit

While there is much coverage of the build up and the security against protestors, and even a high level overview of what will be discussed, sometimes important details and historical context are severely lacking.

Portraying G8 Leaders as Saviors

Typically, mainstream media coverage on issues such as debt relief, seems to result in the same main question: will it help when so many of the recipients are corrupt and are going to embezzle the money away? While it sounds like criticism of the establishment and has the appearance of debate, this question reveals a number of problems:

The G8 leaders are indirectly portrayed as “saviors” (for they have hardly ever been criticized by the mainstream media themselves in terms of, for example, how Rich nations created the debt trap for the third world44 Rich nations improverished the third world even before the debt trap45 Rich nations have then forced disastrous reforms on these countries46 for debt relief in a way that it actually kills, and reduces chances for development (as the aim of reforms are to repay loans). And never is it mentioned that many of the countries in severe debt have odious debt because These same rich nations often overthrew legitimate democracies in favor of dictators and pliable democracies who were the ones to embezzle away the money. Never is it pointed out that large amounts of debt were transferred to them by colonial administrations47 and is completely unfair. By pointing to legitimately worrying examples such as Zimbabwe, it creates the appearance that most countries have such problems. Yet a great number of African countries are actually not as corrupt as such stereotypes would like us to believe. (Needless to say, corruption in rich countries is hardly covered by comparison, or at least not described in the same way, so again perceptions are different.) The type of aid48 is hardly discussed, which is historically used by the donors to further their own foreign policies, rather than necessarily benefit the recipients.

Bush exaggerates claims of trippling aid to Sub-Sahara Africa

Political spin is also going largely unchallenged by the mainstream. For example, President George Bush announced on June 7, 2005, that the US had trippled its aid to Sub-Sahara Africa, between 2000 and 2004. Yet, as the Brookings Institute noted, this was grossly exaggerated:

The Bush Administration has significantly increased aid to Africa, but that increase falls far short of what the President has claimed. U.S. aid to Africa from FY 2000 ... to FY2004 has not “tripled” or even doubled. Rather, in real dollars, it has increased 56% (or 67% in nominal dollar terms). The majority of that increase consists of emergency food aid, rather than assistance for sustainable development of the sort Africa needs to achieve lasting poverty reduction.

— Susan E. Rice, U.S. Foreign Assistance to Africa: Claims vs. Reality49, The Brookings Institution, June 27, 2005 (Emphasis is original)

As noted above, that aid is also for emergency, not the long term development assistance that is also needed. Furthermore, Rice adds that “the President also announced that the U.S. will spend an additional $674 million, which consists of previously appropriated emergency humanitarian food aid.” (Emphasis added.)

“Actual development assistance, excluding food aid and security assistance, increased only 33% from FY 2000 to FY 2004 in real dollar terms, or 43% in nominal dollars.”

“From FY 2000 to FY 2005 (estimated), U.S. aid to Africa will have increased by 78% in real dollar terms or 93% in nominal dollars—not quite a doubling, much less a ‘tripling’ of aid. Of this increase, 50% consists of emergency food aid (PL 480 Title II).”

The only items to have doubled by FY 2004 “were Foreign Military Financing, which increased by 109%, and emergency food aid (PL 480 Title II), which increased by 159%.”

“Actual development assistance, excluding food aid and security assistance, will have increased an estimated 74% from FY 2000 to FY 2005 in real dollar terms, or 89% in nominal dollars.”

Inter Press Service adds to the above also noting that other major promises have not yet lived up to the hype50, such as the $10 billion promised in 2002 over a few years.

President George Bush recently announced a “doubling” of aid to Africa on condition that African leaders be the “agents of reform” rather than “passive recipients of money.” Yet the media typically did not point out that

These reforms refer mostly to economic ones, even though it sounds, and is spun to imply political reform and tackling corruption Aid is usually tied to so many conditions that recipients often have little say in how it is used.)

“Passive recipients” is also an unfair charge for many countries that have, in effect, had their sovereignty undermined by the G8 leaders and the International Financial Institutions such as the IMF that they control, due to the way “economic reform” is prescribed onto these poor countries. Furthermore, as detailed on this site’s foreign aid51 section, each year, the rich countries generally do not live up to their own promises of 0.7% GNI in aid, as

The percentages are usually far lower (US is often the lowest, or near the bottom of the scale, though paradoxically the highest in sheer dollars due to the size of its economy); Where aid is given, it does not usually go to the poorest, but to countries that are of geostrategic importance to the donor. Where aid is given (be it to the poorest or slightly less poor), it is often tied to these same unfair conditions mentioned above.

The BBC did note that money pledged is not necessarily the same as the sums the US Congress will approve52 as the proposed doubling still has to be agreed to by Congress.

Headlines do not reveal any criticims of G8 proposals

When the mainstream has reported the above about Bush, for example, there has been virtually no criticism of Bush’s claim or mention of the Brookings Institute article. Certainly there are no headlines on television such as “Bush exaggerates aid claim.”

Likewise, there are no headlines in major newspapers or television reports saying that the $40 billion dollar debt write-off proposal is political spin.

Media reporting on G8 climate change actions seem to be covered slightly better, to be fair.

Because so many of the headlines are about what different G8 leaders say, it seems as though the agenda and media reporting are driven by G8 leaders and their spinsters. Only when a prominent figure says something does the media seem to react. Rather than being so reactionary, the media could serve the public better by deeply scrutinizing claims and reporting more on the deeper causes up front. (The mainstream media53 section on this site may hint to why this does not usually happen!)

Live 8 and Protests

The global Live 8 concerts were attended by around a million people in total, with many, many more — hundreds of millions, watching Live 8 on television54 (though certainly many would have attended or watched just to see the big stars).

At the same time, over 200,000 protestors formed a human chain in Edinburgh to protest G8 policies and further pressure for meaningful debt-relief.

As successful and important as the Live 8 concerts seems to have been, there have been some criticisms of Bob Geldof and the Live 8 event, with themes including the following:

Geldof and Bono have presented Bush and Blair as saviours, seemingly ignoring G8’s role in Africa’s poverty and debt; The Live 8 concert has been criticized for not having African musicians; Geldof told artists not to criticize Bush and Blair on Iraq;

Presenting G8 Leaders as Saviors, Not Mentioning Their Role In Poverty and Debt

It has not gone without notice, that Geldof and Bono seem to be courting the G8 leaders (Bush and Blair in particular) to such an extent that it seems the valid criticism that they and others have had of these leaders about contributing to world poverty had suddenly vanished, just in time for heavy media coverage.

In fact, combined with the mainstream press reporting, the debt relief, aid and other proposals have been spun into treating these leaders as saviors, when, as George Monbiot puts it, Far from challenging the G8’s role in Africa’s poverty, Geldof and Bono are giving legitimacy to those responsible55.

This point is something hardly touched upon by the mainstream and Monbiot describes it much better than I could: that while they have done immense work to get these issues out to the public and have helped raise millions in aid they seem to have ignored the details of the debt relief such as the types of conditions that have contributed to this poverty in the past, and that in doing so, are giving the G8 leaders a cleaner image than they otherwise deserve. As Monbiot ends his above-mentioned article, “Geldof and Bono’s campaign for philanthropy portrays the enemies of the poor as their saviours. The good these two remarkable men have done is in danger of being outweighed by the harm.”

Live 8 Not Having Enough African Musicians

Some have commented how the Live 8 concert line-ups initially did not include any African musicians and groups (and many are quite political and popular in Africa). Only as an “after-thought” and after much criticism were a few African groups in the list, alongside mega-stars. It has been this type of attitude (even if it was a genuine oversight) that can be quite offensive due to insensitivity.

Though many African singers appeared as background singers in the end, it was pressure from activist and minority groups that eventually resulted in a few “token” singers, though typically not on the main stages.

While much could be written on this, this commentary provides some useful thoughts: Bob, you really blew it56, Louisa Young, The Guardian, July 3, 2005.

To be fair, it might have been the need to draw in large crowds that could have led organizers to concentrate on the big names, though it seems there could have been room for at least a few from other, diverse backgrounds to take center stage.

There are many, many African singers who are not only very popular in Africa, but very political. That could be one of the many reasons they weren’t there, as the next point discusses:

Geldof tells artists not to criticize Bush and Blair

Geldof told artists not to criticize Bush or Blair about Iraq57, the Telegraph reported.

This would be quite shocking to those campaigning for debt relief and poverty-reduction for years, who feel that Bush and Blair do deserve just criticism, and, while can be congratulated for taking important (but small) steps forward, should not be shown as saviours.

Geldof’s Gamble May Yet Work

To be fair to Geldof, his approach, while drawing this criticism, may yet prove to be a good gamble: playing on Bush’s own words, it would seem Geldof wants Bush and the other G8 leaders with the rest of the world, rather than against.

It may work. People will hope it will work. For now, it seems that they indeed are moving forward. But, given both Bush and Blair (as well as some other G8 leaders) have recently been losing credibility with their populations, they too are using this as a public relations opportunity. Pop stars going head to head with seasoned politicians in a political game is also a risky bet!

These are not always just criticism for the sake of wanting to find fault with absolutely everything, as some have dismissed such criticism to be. Instead, some of these are important as it goes into the heart of how aspects of our lives are influenced, how societies are presented information and what makes people act or not act.

Also, despite these criticisms, these concerts were probably worth having. Maybe the public relations and spin will make most people think of the G8 leaders as saviors. Yet, at least there will be increased awareness, and perhaps this, combined with other recent events such as the Tsunami relief appeals, and the debates that have entered mainstream as a result, will help people follow up what their leaders say, and hold them to account. Perhaps the mainstream press will be pressured to do the same too.

Repeating past mistakes?

As the previous page in this section has noted, public pressure58 at G8 Summits and elsewhere have helped bring some of these issues to the fore. Yet,

Partly due to poor media coverage, lack of full democratic accountability of the rich country leaders, and a number of other factors, not much has actually been done, despite rhetoric. The rich countries remain in controlling position, demanding (some might say bribing) poor countries to follow certain practices. At the same time, the underlying causes of poverty and unequal trade are never brought up (for it would show the rich countries causing too much injustice to the poor59.)

Various African commentators have noted that while public protest in the West is welcome, real change will have to come from within. That is,

There is a risk that even the protests will be along the lines of telling Africans how to get out of their problems Instead, what Africa nations really need is to be allowed to stand on their own feet and be allowed to solve their own problems, and where needed, as an equal to outsiders provding much-welcomed assistance. Aid is not a matter of charity; it is justice (as much of the poverty, debt and resulting deaths of millions is due to unfair debt imposed by former imperial and colonial countries on newly independent states to repay colonial costs). If that outside assistance, even from protesters, is more like prescriptions and continually implies that Africa cannot help itself, then it feels like old colonial style paternal attitudes, which would not be as welcome.

Will this Summit also be accompanied by a lot of media coverage but a repitition of past practices?

Small concessions are not the full deal; they are only the beginning

The whole G8 Summit, Live 8 concert and public interest comes at a time when a campaign to “Make poverty history” is fully underway. Yet, as Jubilee Research warns, short term achievements that might be possible at the G8 must not mean that deeper issues be forgotten or missed, and is quoted at length:

While debt cancellation, fairer trade regulations, and the delivery of pledged aid would certainly do much to alleviate poverty, we must not forget that it is only a first, though essential, step on a much longer journey. The existence of unsustainable debt burdens, trade injustice and aid dependency are the results of a global economic system and a financial architecture precisely designed to favour the wealthy, and to ensure the survival of the existing structure of rich country dominance. If we are really and definitively to “make poverty history” we will have seriously to address this imbalance of power, and reverse the present flow of wealth from South to North by reforming the global economy in a way that prevents the current gross misallocation of resources.

Such a project would entail much more fundamental changes than those currently demanded by the MPH coalition.

... It is also vital that the concessions they do win are not perceived to be more generous than is actually the case. As the media swallow the government’s hype about the relatively small concessions which are on the table, it is imperative that the organisations and celebrities backing the campaign do not succumb to the temptation to claim victory and exaggerate the likely benefits.

... Such misguided hype is profoundly damaging.... If the general public is persuaded that such limited measures will transform the lives of the poor, it seems inevitable that their failure to do so will generate serious disillusion, and intensify the perception that further action would merely be “throwing good money after bad”.

... By wrongly convincing the wider public that debt cancellation has been substantially achieved, allowing such hype to go unchallenged plays into the hands of the G8 governments, who have no real interest in freeing developing economies from aid dependency and thus restoring autonomy to their governments. If MPH campaigners go along with such efforts to placate their constituency rather than to resolve the problems at which their campaign is addressed, the movement will be in danger of being hijacked by the very establishment it exists to criticise.

... small concessions must not be popularly misconstrued as “mission completed” triumphs, or interpreted as having attained the far more ambitious aim of “making poverty history”. Should this happen, the triumphs will not just be limited, but also short-lived.

— Susanna Mitchell, High Hopes and Small Concessions; Can Make Poverty Historyreally make poverty history?60, Jubilee Research, June 28, 2005

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These are the pages within this section on this web site that you can also read.

Third World Debt Undermines Development Causes of the Debt Crisis The Scale of the Debt Crisis The Heavily In-debt Poor Countries Initiative is Not Working Public Pressure Can HelpYou are here:G8 Summit 2005Debt and the Global Economic Crisis of 1997/98/99 Debt and the Effect on Children Debt and the Environment Links for More Information

Document History

Date	Reason
July 3, 2005	Added more about the existing debt burden and how the $40 billion compares to that; the result of the Live 8 concerts and public protests.
July 2, 2005	Added more about media portrayal, for example how claims by Bush trippling aid to Sub-Sahara Africa between 2000 and 2004 is an exaggeration and yet this goes largely unnoticed by the mainstream. Also added a small note on climate change negotiation concerns.
June 24, 2005	Added a few more details about the debt cancellation, its criticisms and the costs to Africa.

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