The debt crisis and how to make a ‘Third World’ economy

Vicky Donnelly reflects on working with third-level students on the issue of debt justice.

Working with third-level students last year on the issue of debt justice, we considered Thomas Sankara’s powerful portrayal of the debt as a weapon, wielded by

“technical assassins”, as part of a, “cleverly managed reconquest of Africa.”

Addressing the Organisation of African Unity in 1987, Sankara’s message is clear.  The debt crisis of the 1980s, with its punishing Structural Adjustment programmes, could be neither understood, nor solved, with victim-blaming narratives of reckless borrowing: deliberate structural violence was destroying lives and communities in countries across the continent.

A decade earlier, writing in 1973, Walter Rodney’s, How Europe Underdeveloped Africa (for purchase here), provided a powerful critique, and rejection, of a hierarchy of developmental states, and instead pushed readers to understand ‘underdevelopment’ as a dynamic process, imposed on the Global South and designed to transfer wealth and resources to the North.

Still, a lifetime of exposure to narratives of Western benevolence, in which the ‘Developed’ work tirelessly to help the less-fortunate, can be difficult to undo.  It is here that the debt crisis provides a grim, real-time case study of Rodney’s ‘Underdevelopment’ – a violently exploitative process, in which notions of sovereignty and democracy are made redundant, and victims are held responsible for their own downfall.

Greece stands as an inspiration in terms of popular resistance to the rule and logic of punishing austerity.  Imposing very much the same prescription as the one forced on the Global South in the name of Structural Adjustment, debt has been again been wielded as a weapon and used to create, in a few short years, a ‘third world’ economy in Europe.

For all the talk of Greek ‘bailouts’, less than 10% of the €310bn provided to Greece in 2010 actually went to the people.  In keeping with the blueprint laid out in the Global South over the previous decades, this was a bailout for the private Financial Sector, while citizens have been saddled with the bill. Thus people in Greece get a harsh and unwanted lesson in Underdevelopment.

So, what happens when debt repayments are prioritised over the basic needs of a society?

In Greece unemployment rose by over 100% in the first 3 years of the crisis, with youth unemployment now at 57%.  Unemployment benefit is cut after 1 year, so some families find that two generations – children and parents – are forced to depend on the (austerity ‘adjusted’) pension of their grandparents, while food banks, and rummaging in bins for leftovers have become the only option for others. Homelessness rose by over 25% in the early years of the crisis, and continues to rise while emigration also soars.

The experience of Greece shows us what happens if debt repayments come before public health programmes.

From 2009-11, spending on public health was cut by 25% for hospitals and 50% for pharmaceuticals.  The result?

  • A 52% rise in HIV infection rates, while increased charges for maternity services have been linked to a 21% rise in stillbirths (2008 – 2011) and a 43% spike in infant mortality between 2008 and 2010.
  • Infectious diseases are on the rise and the withdrawal of funding for spraying programmes has led to the reappearance of malaria.
  • Perhaps the most heart breaking of markers – death by suicide – rose by 25% from 2009-2010, and by a further 40% from 2010-2011, making it the second highest level in the EU (Ireland is in first place).

“The IMF”, Susan George wrote in A Fate Worse Than Debt in 1990,

 “cannot seem to understand that investing in… [a] healthy, well-fed, literate population…is the most intelligent economic choice a country can make.”

Debt and the role of development education

Development education is the perfect process for delving deeper into all this, as it sets out to explore the connections ‘between local and global issues’, and to encourage informed solidarity action.

In the absence of a global justice analysis, victim-blaming narratives may go unchallenged (‘Sure, we all partied’); opportunities for solidarity are stifled and we become easy prey for the kind of divisive rhetoric used to deny support for Greece’s  debt reduction proposals.

The pressure to accept the socialisation of private banking losses and the associated structural adjustment at home also has severe implications for our capacity to campaign for debt justice with, and for, countries of the Global South.

But, if anyone remains unsure of where to find local and global links within the debt crisis, the Irish government unwittingly did that work for us earlier last year, in their refusal to engage with two separate initiatives.

The first was a proposal by the fledgling Syriza government for a European debt conference to deal with the crisis affecting citizens throughout the Union.  Ireland’s response was a flat ‘no’.

The second was the decision to snub the newly established UN Ad Hoc Committee on Sovereign Debt Restructuring, set up to “negotiate fair and transparent procedures for the cancellation and restructuring of debts of countries in crisis – like Ireland, Greece, and many other debt-stricken countries” (DDCI 2015).

Sounds like a great idea.  Remarkably, Ireland was one of only 11 countries to vote against the resolution to establish this committee: ten creditor nations, and us.  This flies in the face of global justice solidarity and is, by any measure, a morally repugnant act.  However, when we consider that people in Ireland are paying close to €10,000 per head towards the cost of the European Banking crisis (by far the highest in the Eurozone, where the average is €366) it also deserves to be labelled treasonous.

Graphics: A Really Really Special Case Requires a Really Really Special Solution (Jan 15, 2013) by Michael Taft via blog Unite’s Notes on the Front

Knowledge is Power.   Educators and community workers wishing to explore these issues in more depth will find a range of helpful resources here:

Debt and Development Coalition | Learning Lessons on Debt from the Global South: Argentina Could Show Greece A Way Out Of Crisis by Alan Cibils via Debt and Development Coalition Ireland blog

Excellent debt justice education resources for schools and community groups via Debt and Development Coalition Ireland education section

Jubilee Debt Campaign | More resources, including an interactive map of the global debt crisis, searchable by country.

Transnational Institute | A Pocket Guide the EU Crisis: Short resource explaining how a private debt crisis was turned into a public debt crisis and ten alternatives from civil society groups to put people and the environment before corporate greed.

Notes On The Front | See economist Michael Taft’s excellent blog for more graphs like the one above, and more helpful break downs and translations of the turgid data and jargon designed to keep most of us ignorant about crucial economic issues and decisions.

Photo credit on lead image: ‘Let Greece Breathe’ London 15 Feb 2015 by Sheila via Flickr (Creative Commons CC-BY-NC-2.0 license)