By Natterjack
Ending imperialist exploitation of the global south is the solution to all of the world’s problems and every capitalist knows it.
On the 23th of June this year there was a small, seemingly insignificant side note in the financial sections of some of the more serious media outlets. This minor news item was also briefly covered by the mainstream media outlets but mostly with no comment, analysis or any democratic debate. Yet in truth it was the most important geo-political decision made this year and will have massive and far reaching consequences for the whole planet if not changed. The decision or lack of one, on a way forward was that of the Paris climate finance summit of world leaders, IMF, World Bank and other creditors. They failed to agree any major changes in relation to debt restructuring of the Global South or to move forward with a new proposed alternative financing model to access low interest loans to tackle the effects of climate change.
This decision is a serious disaster, not only for poor countries in the Global south, unable to escape the imposition of draconian dollar debt traps from US backed creditors but also for the COP climate aims to hold down a global temperature rise to 1.5 degrees. Today the vast majority of countries are missing their pledges to reduce fossil fuel emissions. To prevent a rise in global temperatures all countries including the highly populous poorer nations need massive investment away from oil, coal and gas to renewable energy, water conservation, and re-forestation. The average world temperature is already at 1.2 and rising. This summer we had a small taste of things to come if we fail this tipping point. The extended periods of temperatures over 40 degrees in large parts of the northern hemisphere and prolonged droughts in Africa and Asia, led to wild fires, dropping water tables and crop failures. It also saw a massive displacement of people from their homes caused by the effects of climate change, the UN estimate at least 13 million for Africa alone this year with no end in sight. The 3rd world nations simply do not have the resources or access to fair finance but are also handicapped by crippling debt repayments. If they are prevented from investing in the transition there will be huge areas of the global south unable to sustain populations resulting mass migration and death.
Background to the issue.
Its’s obvious that a structured plan of Debt forgiveness and access to fair development financing are key to lifting billions of people out of poverty and enabling the Poor nations of the global south to invest in their own futures and mitigate the effects of global warming. So why do world leaders and global financial institutions fail to find reasonable solutions year after year even as the situation becomes more and more serious for all concerned? The answer lies in the fundamentals of the global capitalist system and post war replacement of colonialist systems of government in what is today the Global south. Colonial European powers followed by the rapidly industrializing US used their military advantage in the 19th century to either violently invade and occupy large areas of the globe including Africa, South America and Asia and or instigate corrupt puppet governments. Northern capitalist firms accumulated a huge mass of profit based on extracting surplus value with slave labour and cheap inputs of energy and raw materials gained via occupation. Both Rosa Luxemburg and Lenin recognized geo-political Imperialism with its associated capitalist exploitation as the main problem of their time. Interesting Lenin identified a small group of mainly northern hemisphere countries who he labelled as Imperialist in his book “Imperialism, the Highest Stage of Capitalism” first published in 1917. Over 105 years later, this group remains basically unchanged and is represented by the G8. As Marx correctly surmised this accumulation model is over time unsustainable and results in falling rates of profit with eventual market in-balances and depressions, leading to protectionism, confrontation and war. As the obvious exploitation of colonialism and slavery became morally untenable in the 20th century many of the global south countries fought for independence. This should have led to a re-balancing of power and income flows due to self-determination and the end of northern capitalist dominance and rapid development of the global South. It clearly did not, as of today inflation adjusted incomes per head of population basically remains unchanged since the 1960’s in most global south countries. After the war, under US leadership the main industrialized nations were able to create a financial system of dollar dominance. The main lending institutions, the IMF and the World Bank are to this day exclusively controlled by the US or Europe and the all the main essential commodities are traded in dollars via western markets. US financial control of the lending institutions has allowed the imperialist exploitation to continue under the guise of, at least on paper, democratic governments or in many cases corrupt military juntas.
How countries in the global south are kept poor.
Northern capitalist firms own and jealously protect the intellectual property and higher manufacturing process knowledge. (A very recent example being the extreme lobbying of multi-national western pharma firms to prevent the release of the IP and process knowledge for creating new mRNA COVID vaccines). This knowledge advantage enables them to extract the most surplus value from the manufacture and dictate the global market price of the finished goods or services, forcing poorer countries to trade only in raw commodities or provide cheap labour to these northern multi-nationals who own the rights to the product. This dollar dominated artificially created pricing differential for products and services aimed at western consumer markets, creates profit and asset accumulation in the North, strengthening their currencies relative to the south. Poor countries then have to spend more and more of their earning in acquiring dollars to pay for basic commodities compared to their northern counterparts, this wealth is then missing for investment in development or industrial research. The second important lever of imperialist control is financing. Northern imperialist governments and their private financial firms in the banking and venture capital sector dictate the terms of any lending or investment. To make any development progress poorer countries need to access to international finance, issuing bonds in their own weaker currencies leads to risk adjusted higher interest rates making borrowing prohibitively expensive. As an example Holland a country of only 17 million people has more investment in solar energy than the whole of sub-Saharan Africa. As part of the EU the Dutch government and firms can access subsidies and cheap loans, African national have no access to these investment vehicles. The IMF and World Bank lend to these countries but there are strings attached. Poorer countries to acquire funds are required to carry out neo-liberal “structural reforms”. This always means opening their markets to international multi-nationals who then buy up government assets like raw materials, mineral and mining rights and cheap labour. In recent years the situation has been compounded by private venture capitalist and other financial bond holders lending money, looking for big returns on capital. After the financial crash of 2008 and later during COVID western governments and central banks flooded the market with cheap government bonds, bought primarily by these large financial firms. To make high profits on the interest payments they received from governments the firms lend to poorer nations at inflated interest payments. They also package deals with national asset acquisition and private take overs of local firms. Because the majority of these debt repayments are in dollars any sharp rise in value of the currency caused by the Fed raising interest rates, causes a huge problem for the debtor nations resulting in a wave of sovereign de-vaults or diversion of earning to service debt. Just a few recent examples Pakistan, Sri Lanka, Argentina, Gambia are all close to or already in de-vault, other countries like Zambia or Kenya are spending up to a 3rd of foreign earning on debt re-payments. Kenya halted payment of wages to teachers and nurses last month to cover monthly debt re-payments instead.
The problem and solution
Center left or right governments of the G8 will never come up with a reasonable solution to this issue as they are intrinsically embedded in the capitalist system and have become the executive arm of US led multi-national firms and finance. They receive direct payments personally from fossil fuel firms, their political parties are sponsored and lobbied by big business and many of them swap backwards and forwards into the executive arm of these firms. Capital is only interested in maximizing profit; it is an incredibly inefficient way to allocate resources and because profit rates fall over time, the system needs perpetual growth, this is unsustainable with the plundering of natural resources. There is massive allocation of surplus value extracted from the global south to wasteful consumption with no real benefit. Seasonal fashion, sugar cane for soft drinks, SUVs, giant cruise ships, advertising, private planes, the list is endless. The US led hegemony of capital via the dollar and private asset ownership understand all too well that any move away from this global system to a fairer re-distribution of resources and public democratic ownership of assets by local populations would mean a collapse for their profit accumulation. Thus they do everything in their power to prevent it. The US and its partners will prevent any attempt to replace the dollar as currency of finance, even if it means destabilizing markets and governments. They will issue protective laws aimed at firms or governments of poorer countries from acquiring IP or technology in the high tech sectors and will wage war to acquire future assets, land and water. Details of bail outs and debt re-structuring are always kept a closely guarded secret, to prevent the wider public from having a democratic discussion over the conditions and results.
So what is the solution? The start must be an international collective movement to demand radical debt forgiveness. We need a reawakening of the non-aligned movement of governments to challenge the dollar dominance in the virtual currencies of the future. In the short term there must be the same demand for access to fair financing for investment in future renewable technology and development for poorer nations. Institutions like the IMF and World Bank along with the Paris club of creditors should be forced to publish any terms and conditions of debt re-structuring.
As mentioned at the start of this article The Bridgetown initiative a proposal from the government of Barbados for alternative and sustainable access to finance and debt was rejected by the creditor nations at the Paris summit. It wasn’t in any way that radical and was basically asking for access to $100Bn of available funds in a UN based reserve currency to subsidized directed investment to mitigate climate change and allow access to reasonable finance for poor nations. It also required debt repayment suspension for those countries hit by massive natural disasters like the Hurricanes, flooding or a pandemic. Again it was rejected by international leaders of finance.
The real answer though is not fair access to finance and debt re-structuring, however welcome and reasonable in the present situation. A more radical change of the system with intelligent allocation of resources based on human needs and environmental impact, not individual profit is desperately needed. It will require the abolishment of the capitalist system of money and to replace it with a fair system of international cooperation and public ownership. A real Marxist solution.
It will be a hard fight to save the planet. The billionaire owners of capital have no real interest in sustainable solutions they seem to be more interested in wasting all their wealth on sending their rich friends into space for 3 mins rocket trips!
This is not a simple north vs south fight, only a tiny handful of billionaires benefit from this massive exploitation of the global south with millions of people in the northern hemisphere facing extreme poverty and job insecurity on top. Oxfam figures showed the 10 richest men in the world owned more wealth than 3.1 Bn of the poorest people on the planet. This absurdity and global injustice needs to find an end or it will destroy the planet and all of our lives.