Indebtedness economy : « We need to speak with one voice and act together in a coordinated way in the common interests of our peoples »

Envisage a consortium of borrowing African countries as part of the breakaway transition… in order to initiate broad mobilization for sovereign repudiation of odious or illegitimate debt

Submitted to AlterPresse on September 3rd, 2023

By Aziz Salmone Fall [1]

August 30, 2023

Good Afternoon

Ladies and gentlemen, dear colleagues

Welcome to Dakar, the land of my birth, where you are all at home. In our culture, the hand that gives also makes one subordinate, but when we borrow, we return without interest. In other words, it is a gift. Our values may have changed, but there are still traces of our African identity that remain intact. Just like the rest of the planet, we have become victims of moneytheism. To unite as borrowing countries, we first need to understand how those against whom we are defending ourselves are organized, both visibly and invisibly, and then we have to articulate a concerted and coordinated strategy for action.

As a pan-Africanist, I have a vision that may reassure some but offend others. I am convinced that if Africa were one, and spoke with one voice on financial matters and development, things would be different, and that we would not be gathered here in a chic, foreign hotel graciously enjoying the spaciousness of the Dakar coastline. If we want to unite to defend our interests, we need to know who our opponents are, even when they claim to be partners and hide within various clubs. We need also to debunk what is wrong in our ranks.

We have taking on debts which are sometimes odious and illegitimate, and others which were contracted by generations that did not necessarily benefit from them. The global economic crisis has been exacerbated by the pandemic, by the war between Ukraine and its allies against Russia, and finally by the unilateral decision of the European Central Bank, the Bank of England and the US Federal Reserve to raise their interest rates. This has led to a flight of capital from the South to the North, at a time when investment funders were demanding that the indebted pay more than 10% in order to refinance their debts.

Increasingly, debt payments are being suspended. In the last 3 years, 9 countries have defaulted : Argentina, Ecuador, Lebanon, Suriname, Zambia, Belize, Sri Lanka, Russia and Ghana. Others are on the verge of default, including El Salvador, Peru, Tunisia, Egypt, Kenya, Ethiopia, Malawi, Pakistan and Turkey. Private creditors, such as investment funds and major banks, hold more than 50% of the sovereign debt of developing countries. The other holders are the World Bank (Wb), the International monetary fund (Imf) and the former colonial powers in the Paris Club. China is not the main creditor of the countries of the South as it is alleged, and, as ‘sub-imperialist’, it has to defend its interests within the Imf despite its economic power, since it holds only 6% of the votes. So, it prefers to deal bilaterally with borrowers through its own state and private banks.

The United Nations notes that fifty-two countries, or almost 40% of developing countries, have "serious debt problems". The Bretton Woods twins are renegotiating the terms of the debt they control, in order to preserve the debt system that keeps the global South under the yoke of capitalism. Imf and Wb lending to low-income countries jumped dramatically in 2020 and will be maintained at a high level for several years with conditionalities attached... ”The objectives of dominant capital are still the same - the control of market expansion, the plundering of the planet’s natural resources, the over-exploitation of the labour reserves of the periphery - although they operate under new conditions and in some respects quite different from those that characterized the previous phase of imperialism [2] ".

The result is that capitalist rents are made possible by a "globalized law of value" based on a hierarchy of prices for labour power. "Financialized capital-value imposes its law on everyone through its insane and totally excessive demands for returns. On the other hand, the banking oligopoly feels untouchable since the collapse of Lehman Brothers, because everyone now knows that the failure of a new systemic bank would once again lead to global chaos. This is why the lobbying force of the banking world is so effective, dismantling or delaying any serious regulation that could undermine the power of each of these banks" [3].

Transnational and plutocratic financialization is overturning the modes of regulation that have run out of steam and imposing supra-imperialism at the end of the 20th century. I coined the term supra imperialism to describe the new order that imperialist capitalism is trying to impose.

This supra imperialism (supra, from the Latin au- dessus, higher) refers to the multiform extensions of the space of capital in which different oligopolistic vectors are trying to influence the world economy. The multiplied expansion of financial assets, over the last three decades, their hybrid forms of portfolios and derivatives and other tritrizations, enable financialization to link up with the various sectors of productive life and consumption, to influence them and induce structural changes within the global economy.

This is exactly what Ben Fine has grasped :

"Finance maintains a symbiotic relationship with the process of capital accumulation, where it assumes vital functions while simultaneously being driven by its own imperatives, which aim to appropriate a surplus created by the economy, itself not generating any directly. At a very general level, financial markets are associated with two types of function : borrowing and lending to buy and sell goods or to expand economic activity. Access to finance, from the latter point of view, is crucial, not only for the growth of businesses, but also to ensure individual survival in competition. Since finance governs access to capital for expansion, it is in a position to demand remuneration in the form of what may be generically termed ’interest’ (which may be obtained in the form of dividends, capital gains or otherwise, in relation to the corresponding assets liable to speculative transactions)" [4].

The neo-liberal project is restructuring the industrial and wage-earning mode of production and imposing a procedural business law that favours consenting contractors prepared to risk the casino economy. The big bosses, the mercenaries of finance, in charge of increasing the value of these assets, get bonuses and astronomical salaries every time shareholders return their investment.

These stock options and various property rights enable them to hold hostage financial arrangements that in reality benefit a small circle of their subordinates, who are dedicated to reducing costs and cutting jobs within the company. These arrangements by sovereign wealth funds, insurance funds and pension funds, absorb companies, generating shares and taking advantage of deterritorialization. They provide a cash flow for those who put their money into these risky portfolios. Shareholders demand value, and this is based on progressive value that endlessly postpones accumulation. This caste, which operates on the basis of rent captalism, has found itself at the top of the major listed companies.

The technocratic and financial power of this nebula, which I describe as supra imperialism based on oligopolies, is itself in crisis in the struggle to centralize control of capital. The procrastination of the City of London and New York is worrying as the world economy shifts towards Asia. China’s debt is estimated at $55,000 billion, 40% of which is held by non-financial companies. As long as China retains state control of the bulk of its banking sector, the financial sharks of the triad know that China will remain sovereign and that they will not own the world, which may well escape them [5].

Faced with the threat of a global financial crisis and a generalized recession, the financial sharks and agents of the plutocratic oligarchies are resisting the only possible solution, which is to roll back financialization. In fact, the only way to ensure that capitalism is sustainable is through far-reaching structural reforms ; broad decentralization of the surpluses drained by globalized capitalism ; decentralization to give national governments greater room for manoeuvre ; and sovereign projects coupled with a restructuring of the global international financial system.

The response of the authorities of globalized finance privileges a headlong rush into war and the pursuit of dispossession. It maintains inequality in the distribution of wealth and income, coupled with the exploitation of labour and resources. This is the other side of the supra imperialism coin. It is characterized by what Harvey describes as accumulation by dispossession. The pile of non-exhaustive phenomena includes : dispossession, coupled with the generalization of the law of globalized value, the concentration of capital, the violence of plutocracy, the mutations of value-capital (and its cycles identified by Marx : capital-money ; productive capital and commodity capital), particularly financialized at the transnational level, the immaterial value systems of communication and the militarization of globalization - a segment of the Core and sub-imperialist.

Amin speaks about “Monopolies operating in the control of global financial flows. The liberalization of the establishment of the major financial institutions operating on the world financial market has given these monopolies unprecedented efficiency. Not so long ago, most of a nation’s savings could only circulate within the - generally national - area controlled by its financial institutions. Today, this is no longer the case : savings are centralized by financial institutions that now operate worldwide. They constitute financial capital, the most globalized segment of capital. The fact remains that this privilege is based on a political logic that makes financial globalization acceptable. This logic could be challenged by a simple political decision to disconnect, even if it were limited to financial transfers. Moreover, the free movements of globalized financial capital operate within frameworks defined by a world monetary system based on the dogma of free appreciation of the value of currencies by the market (in accordance with a theory according in which money is a commodity like any other) and which accepts the dollar as the de facto universal currency”.

Few social formations in the Global South are able to overcome the asymmetry of global inequality. Just as the countries at the Core remain inward-looking, self-centred and imperialist, structuring the world order, so the peripheral countries suffer from it and adjust to it, without becoming centred on their own self-interest. However, the peripheries have their share of rich people. As long as the return on capital outstrips the rate of growth, wealth will be confined to a growing minority of the world’s population, as it is in the microcosmos of Africa. Oxfam’s report is rather revealing of this economic horror. Inequalities are increasing so inexorably that reformists can only dream of tightening taxes and regulations, while people rage in revolt or fall back on their own culturalist identities.

"The wealth of the richest 1% of the planet is more than twice the wealth of 90% of the population (6,9 billion people). The world’s billionaires - just 2,153 people - have more wealth than 4,6 billion people, or 60% of the world’s population. 2/3 of billionaires derive their wealth from inheritance, monopoly or nepotism. Worldwide, men hold 50% more wealth than women. Women do more than 3/4 of unpaid domestic work and account for 2/3 of workers in the care sector" [6].

Oligolipolisation is also reflected in the redeployment of transnational corporations, visibly unaffected by the covid pandemic. Their top 100 had already a combined value of $31,7 trillion at the end of March 2021, more than the Gdp of the United States and China combined [7].

But this strength of the plutocratic transnationals and their monopolization of wealth is deceptive.

Christian Palloix rightly observes that :

"At the start of the 21st century, capitalism is clearly showing signs of running out of steam, or even of simmering crisis(es) - which is certainly nothing new ! But the signs are specific : slowing growth in emerging countries, plateauing growth in advanced countries, a levelling off of world Gdp forecast for 2018-2022, a fall in direct investment abroad, a slowdown (or even break-up) in world trade, a slowdown in productivity growth́, the threat of financial crisis like the one in 2009, growing inequalities in distribution, etc.

One major player in capitalism today, Multinational corporations (Mncs), is emerging as a predator of wealth fueling the disorders of the capitalist economy at global and national levels.

While direct investment flows have fallen in most of the world’s industrialized countries since 2008, they have held steady in the global South, and in many African countries they are growing, mainly as a result of the scramble for natural resources. "Fdi flows to Africa rose by 11% to $46 billion" [8].

Don’t agonize, Organize !

In the face of this greedy and insatiable steamroller, African borrowing countries must stand united, on the eve of the Mdg summit in (2023) September and other forums, such as the forthcoming Wb and Imf annual meetings in Marrakech from 12 to 15 October (2023). We need to speak with one voice and act together in a coordinated way in the common interests of our peoples. Erasmus said, "Concordia fulciuntur opes etiam exiguae, Union makes the strength of even weak resources.

When, on 29 July 1987, Thomas Sankara, echoing Fidel Castro’s call in 1985, at the Organization of african unity (Oau) Summit called for a united front in Addis Ababa against debt, he asked his peers and borrowers to stand united and refuse to pay the debt and cancel it, saying that whoever could pay it should go and pay it the next day, but that if we refused to pay it, the creditors would not die, whereas if we paid it, we would all die. He insisted that if Burkina Faso alone did not pay, it would not be at the next summit. Everyone applauded, hilarious. Thomas Sankara did not attend the next summit. He was assassinated the following quarter on 15 October 1987.

Along with 22 lawyers, after 25 years of fighting, I prosecuted and convicted some of his killers. But the main one despite been convicted is still protected by the financial sector in Côte d’Ivoire. What Sankara fought for is still on the agenda : pan-Africanism, sovereignty and for borrowers to be united and fight for development that benefits their people.

In the 1950s and 1960s, we took our technocrats to Washington for internship and an education. There they were fed the ideas of Rostow and Caincross. Caincross argued that countries would start out as new borrowers, evolve into advanced borrowers and eventually become new lenders. This mirage of the possibility of becoming a rentier, conveyed by the ideology of indebtedness, has been emulated. We have all been caught up in the debt economy, which was justified by the weakness of our domestic savings and the form of development advocated.

‘’The starting point of the tale is that debt is not bad in itself : debt can be beneficial if it is used for highly profitable investments, and in parallel with strong growth and fiscal prudence. It would be harmful if it were costly, unnecessarily risky, misappropriated or lacking in transparency’’.

We have put our trust in and looked to the Paris Club, the London Club and the City of London, begging and pleading, and our instinct remains to imitate the masters and try to became the borrowers’ club ourselves.

We have consented to panoptic surveillance by international financial institutions and new international surveillance mechanisms such as Public Expenditure and Financial Accountability (Pefa), the Open Budget Initiative and financial rating agencies.

Our institutional systems have been constructed with a mirror effect, and we are playing and cannot change the rule of the game. New players are moving into new segments of capital, closer to the new forms of access to foreign and local capital that have emerged from the era of structural adjustment. There are now more members of state power recycled into companies. But more subtly, as in the private sector, there is also a core of experts and managers within the senior bureaucracies of borrowing countries, often in charge of negotiating, evaluating or implementing programs, who have a host of beneficiaries and brokers upstream and downstream of them. This is expertocracy. It can talk like the rhetoric of the World Bank, it rubs shoulders with consultants, or even has the same status, and tries to distance itself from the circuits of state accumulation forged in the neo-colonial phase.

Lacking the means of technological reproduction, but possessing managerial know-how, the ’expertocrats’ are among the only people capable of deciphering the new forms of accumulation possible, which makes them attractive and strategic for the World Bank, the Imf, the Oecd bloc, and even the major bilateral cooperation agencies, but also for certain more hidden levels of the State trying to use them for illicit enrichment. In charge of projects and programs, these new strata run veritable enclaves within the State and society, with a whole hierarchy of managers and agents depending on them. While some members of this elite do not respond to predatory temptations, others are subject to them, especially as they are favored by new rules of the game that they can understand.

At the session devoted to sovereign debt restructuring, Secretary General Isabelle Bui invited all the stakeholders - creditor and borrower countries - to engage in a dialogue that would "enable us to develop joint analyses of current risks, but also to consider ways of preventing new crises, highlighting the work carried out in recent years by the Paris Club, where the principles of sustainable financing were first defined in 2016, leading to their adoption in 2017 by the G20 member countries".

And that "the implementation of these principles by all stakeholders, official creditors, private creditors and borrowing countries, must now be one of the international community’s priorities in order to reduce the risks of a new debt crisis in developing countries".

The submission of political regimes to the desiderata of donors and creditors’ clubs in the name of realpolitik, the neo-colonial system and their personal interests is indirectly and objectively a borrowers’ club. It is therefore wrong to believe that a tacit borrowers’ club does not already exist. Shaped by the Group of 77, the non-aligned movement, the heavily indebted poor countries, the victims of neo-liberal structural adjustment and the development policies of the Oecd, this club objectively exists. It comes up with more or less concerted demands. A few weeks ago, the High-Level African Working Group on the Global Financial Architecture (coordinated by the United Nations Economic Commission for Africa (Eca), the Ministers of Finance, the African Union, the African Development Bank, the Eca and Afreximbank, and the World Bank, and including the participation of Imf staff and Executive Directors) met and ask the Imf to be adapted to the new century.

« The African Ministers of Finance and Economic Development called for reforms to strengthen the Imf’s operational model, lending instruments and governance structure in order to deal more effectively with exogenous shocks ».

« Ministers deplored the inadequacy of resources in the Imf’s Poverty Reduction and Growth Trust and called for immediate action to increase pledges to it to ensure its long-term sustainability.

You probably all know the interesting measures they advocated. Among them :

They urged an end to the reimbursement of administrative costs and the sale of part of the Imf’s medium-term gold reserves to increase the availability of financing.

Ministers reviewed access limits as resources became available and called for the annual access limit to be increased to 200% of quota and the cumulative access limit to be increased to 600% of quota.

Ministers urged the Imf to raise the annual access limits for the Rcf and the Rfi from 50% to 100% of quota, while maintaining the higher cumulative access limits at 150% of quota until at least the end of 2024.

The calculation of quotas should be reviewed, in particular by reducing the weight given to the current categories of the formula, i.e. "openness" and "reserves", and providing for another category that takes account of "exposure" or "vulnerability".

They call for the exploration of a market access tax, Tobin tax style, or other fiscal remedies » [9].

In reality, we will have to go further in coordinating borrowers and their policies. We can look sympathetically at the proposals of Development reimagined, which suggests a borrowers’ club [10] based on the trust of the participants, and taking over the microfinance strategies of Grameen, with strong coordination and enabling loans to be taken out collectively.

I think it would be appropriate for African countries, while waiting for a political union, a bold African development Plan and a single currency policy, to envisage a consortium of borrowing African countries as part of the breakaway transition.

The borrowers’ consortium would be a supranational African partnership and cooperation entity to strengthen their negotiating power and the execution of one or more economic repayment and loan operations. It would act through consortium agreements with each donor and creditor.

It would demand to participate, within the Paris Club, in the negotiations that concern them.

The consortium would first have to agree internally on public finance management, i.e. revenue management, debt management and public expenditure management. How to secure and use resources effectively, efficiently and transparently, how to manage both expenditure and revenue, how to curb corruption, capital flight, tax evasion and poor governance, and how to counter certain effects of the globalization of the economy and trade.

The consortium could carry out an audit of debts and initiate broad mobilization for sovereign repudiation of odious or illegitimate debt.

Mobilize to build a new democratic international financial architecture

Ensure concerted action to borrow intelligently, promote debt sustainability and transparency, how to borrow without risking over-indebtedness

Vary the sources of financing and loans, and maintain a scale of interest rates and conditionalities that are economically and socially bearable for our populations.

Set up a bridging insurance mechanism, in the event of non-repayment for very serious reasons.

Invoke the suspension or cancellation of repayment, on the grounds of necessity, or international legal provisions such as a fundamental change in circumstances that is not the fault of the debtor.

Resist borrowing and trading in foreign currencies.

Propose a World Bank that lends without interest and for projects and programs that respect people and the environment.

Work for an Imf that curbs financial speculation by banks, fraud and tax evasion, and guarantees currency stability,

Collectively manage a common platform or basket through which borrowers can obtain loans.

Buy securities that increase in value when loans are repaid.

Allow public and private companies to borrow up to a mutually agreed amount.

The repayment period depends on the amount and the borrower’s profile.

An investment fund to invest in common infrastructure, expenditures and goods

Togetherness, oneness, unity, “When spiders unite, they can tie down a lion.”