G8 meeting in Kananaskis fails to deliver

By Derek MacCuish

It's been a bad week for corruption and abuse. Yet another major corporation is caught cooking its books so that its senior management and accounting firm can make off with a few billion dollars. George Bush is telling the Palestinian people to embrace democracy by getting rid of Arafat. Several US states are unhappy that the Supreme Court is overthrowing tradition by protecting the mentally handicapped from execution. Even Martha Stewart has been accessorizing for summer with a little insider trading.

In the same week we've seen G8 leaders telling Africans that they won't get help fighting poverty if they don't eliminate corruption and bad management. The "G8 Africa Action Plan" isn't a "new beginning" for Africa. It's arrogant and patronizing, and in the end will do nothing to improve the lives of impoverished Africans.

The G8 plan for Africa is based on a platform of trade and investment. The reality is that African "participation" in the global economy is limited to the provision of basic commodities. Their production and extraction is increasingly in the hands of foreign corporations. Privatization and deregulation of these industries is a condition of aid and debt relief.

The G8 countries are ignoring pleas for substantial change in the global economic system. The UN Conference on Trade and Development says that "the current form of globalization is tightening the poverty trap" in its "Least Developed Countries Report 2002," released this month.

This report goes on to say that policies toward impoverished countries "should include increased and more effective aid and debt relief, a review and recasting of international commodity policy, and policies which recognize the interdependence between the socio–economic marginalization of the poorest countries and the increasing polarization of the global economy." Debt relief got little attention in this summit. The G8 Action Plan document applauds the current program, calling it "generous" assistance for "countries that are following sound economic policies and good governance." The reality is that the debt reduction available is quite meagre, and conditioned on wholesale privatization and deregulation of public utilities and industry.

Consider that poorest countries have, on average, been able to pay about half the total debt service that comes due each year. Take the example of Tanzania. Debt service due from 1991 to 1996 (the year the debt relief program was launched) averaged US$226 million. So probably the country was making actual payments of little more than $100 million.

In November, after five years of economic adjustment, Tanzania finally completed the debt relief program. Debt service is now predicted to be an "average of US$116 million during 2001/02 to 2010/11" according to the World Bank and IMF analysis. Total amount of real progress? Zero.

About a third of the debt payments African countries make to the World Bank – their biggest single creditor – is interest payments. There are two aspects of this to consider. One is the obvious question of why the World Bank – which makes almost US$2 billion profit each year – is taking so much money out of impoverished countries. The second has to do with the "cost" of debt relief.

If and when these debts are reduced, wealthy countries pay the cost. There is no cost to the World Bank, which doesn't write off any debt. So the cost to wealthy countries is in the payments that go to institutions like the World Bank. The IMF operation is similar, but is a much smaller amount. Either way, this isn't money that goes to impoverished countries to help in their fight against poverty.

The failure of the G8 leaders to act properly on debt relief – full cancellation, with the financial institutions taking the hit on debts they write off – is a discouraging indication of the low priority they allot to the lives of people in the poorest parts of our world. African leaders can use words like "partnership" all they want, but the G8 has made it clear there will be no changes made in the current arrangement of economic exploitation and dominance.