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Africa's Debt & Iraq's Debt - Washington's Double Standard

Discussion in 'BBS Hangout: Debate & Discussion' started by Zion, May 21, 2004.

  1. Zion

    Zion Member

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    Africa's Debt & Iraq's Debt - Washington's Double Standard
    April 21, 2004

    "When a despot falls, his debt should disappear with him. That is what the White House has tasked former Secretary of State, James Baker, to convince Iraq's major creditors to accept. But when it comes to Africa, Washington practices a double standard..."


    This week when the World Bank and International Monetary Fund (IMF) hold their annual spring meetings in Washington, DC, Africa’s debt crisis will hardly appear on their agenda.

    As these wealthy and powerful institutions mark their 60th anniversary, the U.S. and other rich countries that control them will again this week refuse to address the massive burden of illegitimate debt that African countries face. At the same time, however, the Bush Administration has been actively pursuing the cancellation of Iraq’s $120 billion debt as a means to support that country’s supposed transition to democracy.

    The following talking points explore the double standard in U.S. policy that brings the White House to advocate for the cancellation of Iraq’s unsustainable debt burden but causes it to ignore the massive debt crisis faced by African countries.


    --------------------------------------------------------------------------------


    Africa’s Debt Crisis

    * Africa's external debt burden currently stands at more than $300 billion, in a continent where most people subsist on less than $1 per day.

    * Africa’s debt crisis is the single biggest obstacle to the continent's development and to the fight against HIV/AIDS. It represents a crippling load that undermines economic and social progress.

    * African countries spend almost $15 billion each year repaying debts to the World Bank and International Monetary Fund (IMF) and other creditors.

    * Servicing these debts diverts money directly from spending on health care, education and other important needs. While African countries struggle to cope with the devastating effects of the HIV/AIDS crisis, they are currently forced to spend more money on debt repayments than on health care for their people.

    * This year almost 3 million Africans will die of AIDS. 500,000 African children will die of malaria. These deaths could be prevented if African governments could spend more money on health care than on debt repayments.

    * It is estimated that African countries pay $1.51 in debt service for every $1 they receive in aid.


    Illegitimate Debt

    * Most of Africa's foreign debt is illegitimate in nature because of the circumstances under which it was incurred, as well as the harmful effects it now has on the continent’s development.

    * Much of Africa’s debt was incurred by unrepresentative regimes during the era of Cold War patronage, when loans were made to corrupt leaders who used the money for their own personal gain, often with the full knowledge and support of lenders like the U.S. government and the World Bank and IMF. [For example, in the Democratic Republic of the Congo (DRC), formerly Zaire, dictator Mobutu Sese-Seko received more U.S. aid than the rest of Sub-Saharan Africa combined during much of the Cold War, even though it was well known that this money was being diverted into his Swiss bank accounts. The people of the DRC should not now have to pay back loans from which they saw no benefit.]

    * In many African countries, debts were contracted by repressive or despotic regimes and used to strengthen the hold of that regime, contrary to the interests of the nation and its people. These are considered illegitimate "odious debts", and this is an established legal principle. [For example, in South Africa, the apartheid regime took out more than $18 billion in foreign debt in its last 15 years in power. The people of South Africa, the victims of the apartheid regime, should not now be forced to pay the cost of their own previous repression.]

    * In many African countries, debts have swelled over time because of high interest rates and other conditions imposed by creditor governments and banks. These debts are illegitimate, since the original debt has already been repaid many times over.

    * Many African activists and advocacy groups question the notion of an African "debt" to the U.S. and European countries after centuries of exploitation and plunder. They consider all of Africa’s debts illegitimate and ask, "Who really owes whom?"


    U.S. Policy on Africa’s Debt

    * The U.S., other G8 leaders and the World Bank and IMF established the Heavily Indebted Poor Countries (HIPC) Initiative in 1996 to address the debt crisis in Africa and other poor regions. HIPC remains the dominant international debt relief plan integrating all bilateral, multilateral and private creditors in one framework for select countries.

    * Of the 42 countries selected by the World Bank and IMF as potential recipients of HIPC relief, 34 are in sub-Saharan Africa. These countries are eligible for some debt relief, but no African country has been offered complete debt cancellation, and many get no relief whatsoever.

    * Over the past eight years, the HIPC initiative has fundamentally failed to resolve Africa’s debt crisis. It has not reduced the debts of African countries to sustainable levels. In fact, it serves the interests of creditors by continuing to extract the maximum possible in debt repayments from the world’s poorest countries.

    * Recent World Bank and IMF reports have admitted that HIPC is not succeeding in addressing the debt crisis in Africa and other poor regions. But the U.S. refuses to encourage Africa’s creditors to move beyond this framework.

    * President Bush and the U.S. Congress have acknowledged that Africa’s debt crisis represents a real obstacle to the continent’s efforts to combat HIV/AIDS and poverty.

    * Although the U.S. is a relatively minor bilateral creditor of African countries, it is the single largest shareholder in the World Bank and the IMF, to whom most of Africa's debts are owed. As such, it holds major influence over the international response to Africa's debt crisis.

    * The U.S. continues to refuse to use its power to promote the cancellation of Africa’s illegitimate foreign debts, even though the World Bank and IMF can afford to write off this debt from their own books using their own existing resources.


    Iraq’s Debt

    * U.S. Treasury officials estimate that Iraq’s debt amounts to $100-$120 billion.

    * Of this total debt stock, some $40 billion is owed to Paris Club creditors (G8 countries, including the U.S.), and the remaining $80 billion is owed to Arab nations and others outside the Paris club.

    * Jubilee Iraq estimates that an additional $50 billion is owed by Iraq in war reparations to countries like Kuwait and to individuals who claim damages from Iraq.

    * Much of Iraq’s debt can be considered "odious", as it was contracted by Saddam Hussein’s regime and used for the repressive purposes of this dictatorship, with the full knowledge of creditor countries and institutions. This money was not spent on the needs or interests of the Iraqi people.

    * Comparing Iraq’s debt burden with the size of its economy and export earnings, it is clear that Iraq is a very heavily indebted country.

    * In addition, Iraq has urgent relief and reconstruction needs as it enters into a period of important transition.


    U.S. Policy on Iraq’s Debt

    * In December 2003, President Bush appointed James Baker III, a long-time friend and advisor to the Bush family and former Secretary of State under George H. Bush, as Special Envoy for Iraqi debt reduction. He is tasked with seeking an international deal to reduce and restructure Iraq’s massive foreign debt in order to promote peace and reconstruction in Iraq.

    * Baker traveled to Europe in December 2003, to meet with some of Iraq’s creditor nations. He secured pledges from Britain, France, Germany, Italy and Russia to relieve much of the $40 billion owed to them by Iraq.

    * Baker traveled to the Gulf region in the beginning of 2004 and negotiated commitments to waive much of the $50 billion Iraq owes to countries in that region.

    * Early in 2004, reports indicated that the Bush Administration’s goal was to relieve Iraq of two-thirds of its debt burden so that future oil earnings could be spent on reconstruction rather than on debt repayments.

    * Speaking in April, Baker called Iraq’s debt "simply unsustainable", and referred to it as a major obstacle to rebuilding the economy and government of that country.

    * Baker insists that debt relief for Iraq must be achieved quickly, in order to allow Iraq to find its feet. He has stated that efforts to enforce the debt could sink the Iraqi economy and dash hopes for a solid transition in Iraq.


    The Double Standard

    * There are many compelling reasons to reduce Iraq’s debt burden, but these arguments are not being applied equally by the U.S. in the case of African countries’ debt crisis.

    * The U.S. is supporting debt relief for Iraq because it considers that it has vital interests in Iraq and the larger Middle East region. U.S. corporations also have major economic interests in Iraq, which the Bush Administration wishes to promote.

    * The U.S. does not consider it has such vital interests in Africa, despite strong historical ties with the continent and important economic and political relations with African countries. The U.S. acknowledges that Africa’s debt hinders efforts to combat poverty and HIV/AIDS, but it refuses to support debt cancellation for Africa.

    * Another key difference between Iraq’s debt and Africa’s debt is who the creditors are. Much of Iraq’s debt is bilateral and is owed to rich European countries and to Japan. Most of Africa’s debt is multilateral and is owed to the World Bank and IMF, where the U.S. is the principal shareholder. The U.S. appears more willing to pursue the reduction of debts for which it is not a creditor.

    * The Bush Administration and the U.S. Congress argue that much of Iraq’s debt is odious, but they refuse to apply the same criteria to African countries’ debt when it is clear that much of Africa’s debt is also odious.

    * The U.S. appears unwilling to support debt cancellation for Africa because the U.S. actually gains a great deal from Africa’s economic enslavement. The U.S. and other rich countries, as well as the World Bank and IMF, use Africa’s debt as leverage to manipulate the continent’s economic fate to serve their interests.

    * Despite the social and economic costs of this massive outflow of resources from the world's poorest region, the U.S. continues to insist that these debts be repaid. Yet the U.S. does not feel that Iraq’s debt should be enforced in the same way. Such a blatant double standard in U.S. foreign policy must be exposed and rejected outright.


    What the U.S. Should Do

    * The U.S. is the largest and most powerful shareholder in the World Bank and IMF, Africa’s primary creditors, and it should use this power to promote debt cancellation for Africa.

    * A new report released by the Debt & Development Coalition Ireland confirms that the World Bank and IMF have the resources to cancel all the debts owed to them by the poorest countries without negatively impacting their credit rating or lending ability.

    * Secretary General of the United Nations, Kofi Annan, has repeatedly called for a new solution to the debt crisis and the suspension of debt service payments in the interim.

    * As a first step to supporting debt cancellation for Africa, Africa Action believes that the U.S. government should immediately do the following:

    1. Undertake an inventory of the debts currently being repaid by African countries, in order to determine the legitimacy of creditor claims.

    2. Complete a study to ascertain what would be the cost to creditors of the full cancellation of Africa's debts.

    3. Declare a moratorium on debt repayments by African countries until such time as an inventory of these debts has been compiled and the costs of 100% cancellation have been determined, these two studies providing a foundation for moving towards a just resolution to the continent's debt crisis.
     
  2. TL

    TL Contributing Member

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    Debt cancellation would be a worthy topic of discussion for African nations that are experiencing a transition from dictatorships to democracies. Once that happens, the government leader/sponsor should take it upon him/herself to engage in dialogues with the creditor countries. Alternatively, they could go the route that Argentina did and just default on payments and work it out in a more formal restructuring.

    It's complicated as **** to work out the debt cancellation or a restructuring for a nation, but it can be done. However, if the government is expected to be as irresponsible as it was in the past, why aid them in doing so? Until there is meaningful change in the governments of each nation, there is no reason to support a debt restructuring. Once that occurs, it should be looked at on a case-by-case basis.

    Whatever your opinion of the Iraq situation, the goal is to help transition the government to one that is supportive of the needs of the people. Forgiveness of past debts is a critical step for them. Which African nation is overburdened by debt right now and is transitioning from illegitimate to legitimate governments? (that's a real question, I don't know what the answer is, but until I hear of one, I can't support the concept)
     
  3. bamaslammer

    bamaslammer Contributing Member

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    I think we should cancel their debt with the proviso that it forever disqualifies them from receiving any of our money. Otherwise, they should not have borrowed money they never intended to pay back.
     
  4. SamFisher

    SamFisher Contributing Member

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    Quaint.

    Did you even read the article?
     
  5. Lil Pun

    Lil Pun Contributing Member

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    Exactly.
     
  6. bamaslammer

    bamaslammer Contributing Member

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    Yes. If they borrowed the money, they should pay it back or get the debt forgiven and never return to beg at our doorstep. Who cares if Iraq pays back their debts to Europe? I don't. If France doesn't see dollar one from the Iraqis for Saddam-era debts, to hell with them.

    Circumstances under which debt was accrued are not germane to the situation. It still has to be paid back, regardless of who received it. The difference is that the African debt is our money and we shouldn't just forgive it to be nice. The reason why those countries are so poor is because of outmoded command economies and lack of freedom because of totalitarian regimes. I think we're trying to get Iraqi debt forgiven to jumpstart their economy and hasten our departure, plain and simple. Nothing wrong with that.
     
    #6 bamaslammer, May 21, 2004
    Last edited: May 21, 2004
  7. krosfyah

    krosfyah Contributing Member

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    It is a sad state of affairs when the cradle of humanity is the lowest rung on the totum poll. It is immensly complicated with some racial overtones and I doubt I'll ever see a prosperous African continent in my lifetime. It's too bad because it is such resource rich land with nothing to show for it.
     
  8. SamFisher

    SamFisher Contributing Member

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    Let's go back to your original thesis:

    "I think we should cancel their debt with the proviso that it forever disqualifies them from receiving any of our money. Otherwise, they should not have borrowed money they never intended to pay back."

    I see, so since Mobutu Sese Seku, who has been dead for about a decade, and was the dictator of Congo f/k/a Zaire, should not have borrowed money without intending to pay it back and spent it on himself, present day Congolese should not have access to US, World Bank, and IMF loans to build needed infrastructure?

    Please explain why this is a logical or desirable outcome.

    Do you also understand why saying this:

    "Circumstances under which debt was accrued are not germane to the situation."

    is completely at odds with saying this, in the prior sentence?

    "Who cares if Iraq pays back their debts to Europe? I don't. If France doesn't see dollar one from the Iraqis for Saddam-era debts, to hell with them"
     
    #8 SamFisher, May 21, 2004
    Last edited: May 21, 2004
  9. krosfyah

    krosfyah Contributing Member

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    So if your dad buys 4 cars and 2 houses and dies, do you feel you should pay his debt? It doesn't matter what you think. US law states that you don't have to pay it. Why do we hold a country to a different standard?

    If an American company lends money to a dictatorship and it gets overthrown, why does that company think it deserves that money back. They shouldn't have lent it in the first place. They were being greedy and taking a risk. With risk comes consequences.

    Bama, you always tout that Sadaam was an evil dictator that gassed/killed thousands of people...and he deserved to go for the well being of the Iraqi people.

    The end result the same. If America is diverting money from Africa's healthcare system because we loansharked some dictator, the net effect is the death of millions of people. So what is more important. Repayment of a risky debt or the death of millions of people.

    I already know your answer and I'll circumvent you be calling you a hypocryte in advance.

    I actually agree with Bama on this. First for everything. But this action by the Whitehouse does demonstrate a valid issue in Africa.
     
  10. Zion

    Zion Member

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    :confused: So you agree there is a double standard?
     
  11. nyrocket

    nyrocket Member

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    One can barely find a thread around here without basking in the glorious glow of razor-sharp analysis from Buford T. Slammer. That guy is a legend!

    When it's all said and done, I do believe one of my favorite moments of this despicable business is Dub's getting Pappy's lapdog James Baker to go around hat in hand to all the nations that had recently told us in no uncertain terms to blow it out our ass and beg them for money.

    Brilliant!

    Who is the bigger dope in this, Dub for thinking that Baker could pull it off, or Baker for making a fool of himself in the attempt? Hard to beat Dub at being a fool, but down the stretch, Jimbo's neck and neck!

    Speaking of neck, reminds me of Buford's last post:

    And then...


    Hard to argue with that sort of logic.
     
  12. Fegwu

    Fegwu Contributing Member

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    B'Slammer, you show an uncanny and expected myopia on this issue.

    Fact: African countries need to clean up her act (internally) for that is likely the ultimate route to redemtion and successful tomorrow.

    Fact: Africa and her countries is in play in the war of terrorism and illegal immigration, as well as potentially economically beneficial to the stae of Texas and America in general because of the abundance of natural resources like crude oil, natural gas, gold, limestone, etc. I listed terrorism because it is common knowledge now that terror and poverty and bed-fellows. Negleting and isolating Africa is a myopic approach that the west cannot afford to undertake if the war on terror is to be attacked head-on.

    Ultimately the benefits of a stable and vibrant Africa is going to ultimately be beneficial to the world at large economically and political. The potential negative domino effect of the demise of African countries pose is one only the folly will ignore.

    See below for a hint of what I mean.....


    ============================================

    May 22, 2004, 11:09PM


    Bush not doing enough to fight terrorism, GOP senator says

    By MARK PRATT

    Associated Press
    MEDFORD, Mass. -- Republican Sen. Richard Lugar on Saturday said the United States isn't doing enough to stave off terrorism and criticized President Bush for failing to offer solid plans for Iraq's future.

    Lugar, chairman of the Senate Foreign Relations Committee, said the nation must prevent terrorism from taking root by "repairing and building alliances," increasing trade, supporting democracy, addressing regional conflicts and controlling weapons of mass destruction.

    Unless the country commits itself to such measures, "we are likely to experience acts of catastrophic terrorism that would undermine our economy, damage our society and kill hundreds of thousands, if not millions, of people," the Indiana senator said during an appearance at the Fletcher School at Tufts University.

    Lugar said military might alone isn't enough to eradicate terrorism.

    "To win the war against terrorism, the United States must assign U.S. economic and diplomatic capabilities the same strategic priority that we assign to military capabilities," he said.

    He later added, "Military action is necessary to defeat serious and immediate threats to our national security. But the war on terrorism will not be won through attrition -- particularly since military action will often breed more terrorists and more resentment of the United States."

    Lugar, who was awarded the Dean's Medal for distinguished service in international affairs, said it's still unclear how much control the Iraqi people will have over their nation's security when power is transferred to them June 30.

    "I am very hopeful that the president and his administration will articulate precisely what is going to happen as much as they can, day by day, as opposed to a generalization," he said.

    It's not the first time that Lugar has criticized Bush, a fellow Republican. In 2003, Lugar and Sen. Joseph Biden, the committee's top Democrat, warned that the Bush administration had not given enough consideration to what would happen in Iraq after the fighting ended.

    Also Saturday, Lugar blamed the Bush and Clinton administrations for not adequately funding the foreign affairs budget, noting that the military's budget is more than 13 times what the nation spends for diplomacy.


    Link
     

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