Africa's Odious Debts

Triple Crisis Blogger James Boyce originally published this article with Léonce Ndikumana in Project Syndicate, on the effects of the crippling debt many countries have  inherited from previous corrupt governments.

One side effect of the American/British occupation of Iraq is that it sparked public debate on a dark secret of international finance: the debts taken on by odious regimes.

As Iraq’s new rulers debate what to do about the billions of dollars in foreign debts inherited from Saddam Hussein’s regime, voices ranging from the charity Oxfam-International to US defence guru Richard Perle are calling for debt repudiation on the grounds that the debts Iraq now bears were contracted to sustain a corrupt, oppressive regime.

Iraq is not the only country burdened by such debts. Across sub-Saharan Africa, many of the world’s poorest people struggle with the crippling legacy of profligate lending to corrupt, oppressive rulers.

During his 32-year dictatorship, Congo’s former president Joseph Mobutu accumulated a personal fortune estimated at $4 billion, while his government ran up a $12 billion foreign debt. More of the same in Angola, where last year an IMF investigation revealed that $4 billion disappeared from Angola’s treasury over the past five years. It so happens that the Angolan government borrowed a similar sum from private banks in this period, mortgaging future oil revenues as security.

Read the full article at Project Syndicate.

Africa’s Odious Debts

Triple Crisis Blogger James Boyce originally published this article with Léonce Ndikumana in Project Syndicate, on the effects of the crippling debt many countries have  inherited from previous corrupt governments.

One side effect of the American/British occupation of Iraq is that it sparked public debate on a dark secret of international finance: the debts taken on by odious regimes.

As Iraq’s new rulers debate what to do about the billions of dollars in foreign debts inherited from Saddam Hussein’s regime, voices ranging from the charity Oxfam-International to US defence guru Richard Perle are calling for debt repudiation on the grounds that the debts Iraq now bears were contracted to sustain a corrupt, oppressive regime.

Iraq is not the only country burdened by such debts. Across sub-Saharan Africa, many of the world’s poorest people struggle with the crippling legacy of profligate lending to corrupt, oppressive rulers.

During his 32-year dictatorship, Congo’s former president Joseph Mobutu accumulated a personal fortune estimated at $4 billion, while his government ran up a $12 billion foreign debt. More of the same in Angola, where last year an IMF investigation revealed that $4 billion disappeared from Angola’s treasury over the past five years. It so happens that the Angolan government borrowed a similar sum from private banks in this period, mortgaging future oil revenues as security.

Read the full article at Project Syndicate.

Lagarde at the IMF: A lot of stones to touch, but the only way to cross the pond

Kevin P. Gallagher

Christine Lagarde will be giving an acceptance speech of sorts today.  She has a lot to cover.  First and foremost she will have to show that she has fully taken off her French Finance Minister hat and put on a global financial institution hat.  She no longer represents French banks and citizens.  She will have to strike a delicate balance that on the one hand shows she is serious about the Eurozone crisis but on the other shows that she recognizes that there are many other global challenges to be concerned with.

On the Greek crisis she should call for a fresh approach that puts all possible tools on the table, including a negotiated debt restructuring.  She should then quickly recognize that there are other key problems that need to be addressed globally, such as the massive surge in “hot money” to East Asia and Latin America, and the need for a diverse set of tools (that includes capital controls) to address that problem as well.  Furthermore, she should call on the need to address the problem of odious debt in Africa and beyond.  And of course, she should also note the debt ceiling debate in the United States and send a signal to the US of the disastrous consequences of not raising the ceiling.

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Grassing the State

Triple Crisis Blogger CP Chandrasekhar originally published the following article in the Indian magazine Frontline, on the liberalization of India’s oil exploration and production policy.

The real problem facing the country is the neoliberal reform that seeks to attract private capital into a lucrative and sensitive area such as petroleum.

The Comptroller and Auditor General’s (CAG) performance audit of some production-sharing contracts (PSCs) instituted as part of the liberalisation of India’s oil exploration and production policy may turn out to be the next big scam, with more than a whiff of corruption. But, in this season of scams, danger lurks. The danger that much of society can for a considerable period of time miss the wood for the trees. Circumstances strengthen this tendency. In particular, the surprising coincidence of a host of revelations of lack of due diligence, bending of rules, outright manipulation or a combination of all of this that hugely enriches a few individuals and corporations in the private sector and a few functionaries of the state, most often at the expense of the exchequer. Not a day passes without evidence of some new scam.

Whatever may be the cause for this recent increase in scam-related revelations, the surge feeds the notion that corruption has reached unprecedented levels and constitutes the fundamental problem facing India today. The fact that corruption, besides being ethically wrong or morally abhorrent, can influence growth in ways that serve the interests of a few and can therefore be deeply inequalising cannot be denied. But the reason for these developments – which are seen as mere instances of corruption – multiplying in number could be systemic and reflect policy shifts that aim to use state resources to inflate private profit.

Read the full article at Frontline.

When business rules our kitchen

Triple Crisis Blogger Sunita Narain published this article in the Business Standard on the problems with the way the world is producing food and managing food safety regulations.

Once again there is a food safety scare. A deadly strain of E coli bacterium has hit Germany, where it has so far taken the lives of 25 people and affected another 2,300. German food inspectors on the trail of the source of contamination first blamed Spanish cucumbers and are now indicting organic bean sprouts — eating healthy will soon be bad.

This is because food inspectors refuse to look where it matters. The fact is that something is seriously wrong with the way the world is producing food and even more with the way it is managing its regulations for safety. But we just don’t get it.

Let’s recap past food scares to understand the crisis and the response.

In 2005, avian influenza hit the chicken we eat. The world went on the rampage, killing chickens and wild birds to contain the deadly virus spreading across the connected world. But nobody targeted the real problem: the nature of the modern world’s poultry business, which is highly vertically integrated and globalised, and produces factory chickens, not food. In this business, companies strive for lower cost of production because agri-business requires scale and global reach.

Read the full post at the Business Standard.

The Squandered Wealth of Nations: The Age of Greed

Jeff Madrick

When you write a book called Age of Greed, as I have, the derision about the title begins immediately. How is this age any different than others? Greed is a deep human trait; it does not disappear and suddenly reappear.  Even one of my wisest former book editors questioned the idea that greed is different now than it ever was.

But when he finally read about halfway into the book, he got the point.  Self-interest is one thing.  It is what Adam Smith wrote about in the Wealth of Nations in 1776. It makes the invisible hand work.  And if moderate, it can and sometimes does lead to widespread prosperity.

Self-interest rises to levels of greed, however, when it is unchecked by that other great sphere of modern social life, the government.   My argument is that self-interest broadly turned to greed beginning in the 1970s, and then crescendoed through the next three decades.  Milton Friedman and others argued that competition and price setting would themselves check the bad decisions stimulated by greed.  His claims were and remain nonsense.

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Towards green low-carbon growth?

Triple Crisis Blogger Martin Khor published this article in the Third World Network’s Global Trends Series, on last week’s “green low-carbon development” conference in China.

A conference last week in Beijing heard plans by China and other counties for achieving green low-carbon development to combat climate change.  Despite an upbeat mood, the difficulties are many and serious.

Despite the slow progress in the global climate negotiations, some developing countries are already taking their own climate actions to reduce emissions and adapt to the effects of climate change.

Of course, their actions will fall far short of what is required, unless the funds and technology expected as a result from the global talks materialize.  And unless the developed countries also cut their emissions greatly and leave more “carbon space” to the developing countries.

Read the full post at the Third World Network.

The Greek Crisis: The EU's Wasted Year

Daniela Schwarzer

In May 2010, the EU could praise itself for its ability to put together a 110 bn € rescue package for Greece in cooperation with the IMF and, only weeks later, for agreeing on a 750 bn € rescue fund for other potentially illiquid Eurozone members. At the time, these steps appeared as an important demonstration of European solidarity, as a signal of the Eurozone’s ability to get its act together although it had no tested crisis management instruments at its disposal, and as a manifestation of strength in the face of financial markets ready to speculate on the bankruptcy of Eurozone member states or even a breaking apart of the currency union.

A year later devastating pictures from all over Europe hit the covers of the newspapers and magazines: people flock to the streets in Greece to demonstrate against austerity measures and structural reforms which they blame on the European Union. Protesters are also out in Lisbon, Portugal, just like in Spain which so far has not requested financial assistance from the EU and the IMF, but which implements a long list of reforms and budgetary cuts in order not to lose further credibility in the financial markets. In France, the Eurozone’s second largest member state after Germany, a right-wing extremist, Marine Le Pen, wants the country to leave the Euro – and roughly a fifth of French voters would chose her if Presidential elections were held tomorrow. In Germany, skepticism towards the single currency and in particular towards the Southern European members of the Eurozone, has grown tremendously since the package for Greece was launched in spring last year.

In June 2011 –  just as in spring 2010 – the European Monetary Union finds itself at a crossroads. The choice is once again to provide Greece with credit and guarantees, or to let the country slip into bankruptcy within weeks.  This would indeed occur if the so-called Troika, which consists of the European Commission, the European Central Bank und the IMF, refuses to hand out the next 12 bn € tranche of the loan package agreed last year since Greece’s restructuring and consolidation programme is not going far enough.

Read the rest of this entry »

The Greek Crisis: The EU’s Wasted Year

Daniela Schwarzer

In May 2010, the EU could praise itself for its ability to put together a 110 bn € rescue package for Greece in cooperation with the IMF and, only weeks later, for agreeing on a 750 bn € rescue fund for other potentially illiquid Eurozone members. At the time, these steps appeared as an important demonstration of European solidarity, as a signal of the Eurozone’s ability to get its act together although it had no tested crisis management instruments at its disposal, and as a manifestation of strength in the face of financial markets ready to speculate on the bankruptcy of Eurozone member states or even a breaking apart of the currency union.

A year later devastating pictures from all over Europe hit the covers of the newspapers and magazines: people flock to the streets in Greece to demonstrate against austerity measures and structural reforms which they blame on the European Union. Protesters are also out in Lisbon, Portugal, just like in Spain which so far has not requested financial assistance from the EU and the IMF, but which implements a long list of reforms and budgetary cuts in order not to lose further credibility in the financial markets. In France, the Eurozone’s second largest member state after Germany, a right-wing extremist, Marine Le Pen, wants the country to leave the Euro – and roughly a fifth of French voters would chose her if Presidential elections were held tomorrow. In Germany, skepticism towards the single currency and in particular towards the Southern European members of the Eurozone, has grown tremendously since the package for Greece was launched in spring last year.

In June 2011 –  just as in spring 2010 – the European Monetary Union finds itself at a crossroads. The choice is once again to provide Greece with credit and guarantees, or to let the country slip into bankruptcy within weeks.  This would indeed occur if the so-called Troika, which consists of the European Commission, the European Central Bank und the IMF, refuses to hand out the next 12 bn € tranche of the loan package agreed last year since Greece’s restructuring and consolidation programme is not going far enough.

Read the rest of this entry »