Banks and the Third World Elite (1991)

From the July 1991 issue of the Socialist Standard

When the protestors march again into Trafalgar Square this month to demand an end to the massive debt repayments said to be causing Third World poverty, it will be left to Socialists, once again, to point out that you cannot expect the world capitalist system to behave any differently. What strikes the socialist most forcefully is the staggering naivety of the call for banks to be nicer to their Third World clients, to Stamp Out Their Debts, as if the bankers' greed alone is the root cause of the present misery into which the majority of the world's population is sunk.

When the great lending spree to Third World countries began in the early 1970s— taking their collective debt from about $130 billion in 1973 to $612 billion nine years later when the bubble burst—there was a clear and compelling logic driving them relentlessly on.

That was the logic of profit. There was a demand for capital—for grandiose construction projects like dams and new cities to glorify the names of upstart and insecure dictators, for the bribes necessary to bypass planning regulations and plunder forests and raw materials, and for the emerging, thrusting entrepreneurs in the Indias and Brazils anxious to set up their own refining and car businesses and muscle in on the exploitation of the local labour forces previously the sole preserve of foreign multinationals.

So let's have an end to the myths that the evil Western bankers forced their largesse down the throats of innocent and unwilling Third World victims—a typically easy way out for liberal supporters of capitalism, replete with obnoxious racist stereotypes of the cowering slave.

Logic of profit system
And now the banks continue to obey the rules of the profit system by trying to secure some sort of return for their directors and shareholders. Friends of the Earth complain particularly about Lloyds Bank, said to have the largest amount of money tied up in Third World debts:

Although Lloyds could reduce much of the debt using the reserves accumulated with the help of taxpayers, responsibility to shareholders and customers is still wheeled out as an excuse for lack of positive action. (Earth Matters, Summer 1991).

The limit of the reformers' dreams is to pressurise the grasping bankers into reducing “much'' of the helpless Third World's debt, and into the bargain getting Third World countries with any rainforest left to give some of this up to the wise and beneficent West—which has already destroyed its own virgin forests—in return for some further reduction of their debts.

Even assuming this could be achieved, and the banks could be persuaded to relinquish their claim to the money which they (and most of their shareholders) see as rightfully theirs, what effect would it have? Would the local ruling classes in Benin and Argentina immediately plough the money saved into social projects to ease poverty and increase healthcare provision—or into the preservation of those rainforests?

Well, there are two simple ways to answer this question. The first is to ask how they spent the last lot of capital poured into their laps in the great lending boom of the 1970s. And secondly, even if—against all the evidence of those years—they did feel disposed to invest in the well-being of their subjects, there are other tentacles of the world capitalist system which would rapidly smother them.

Local ruling classes

Take the main institutions of global economic management set up by the US and its European, and then Japanese, partners after the war and used to keep Third World ruling classes in their place: the International Monetary Fund, the World Bank and the General Agreement on Trade and Tariffs (GATT).

Loans from the IMF and World Bank are granted on the specific condition that countries cut expenditure on social welfare—in particular food subsidies—in favour of buying Western imports or developing an industrial infrastructure to buy Western know-how and technology. This is backed up by the current round of GATT negotiations which will compel governments to abandon subsidies for farmers and for protecting natural resources like forests. Farmers will be forced from their land, along with all the local knowledge so vital for developing a sustainable agriculture, to make way for giant transnational combines with their well-known concern for sensitive production for local needs in preference to exporting to the highest payer . . .

So even if Lloyds Bank can be persuaded to kindly ‘'reduce” the size of the Third World's tribute allowed it under the rules of the free market, and even if the rulers of Third World countries can be persuaded to kindly spend the proceeds on tackling poverty, and even if the IMF, the World Bank and the GATT negotiators would allow the money to be spent on these purposes, how much of a difference would it make to the millions of starving, homeless, exploited peoples of the world?

Socialists are often accused of being unrealistic in our demand for an end to the profit system as the only way of ending mass poverty. We are told that we must live in the Real World, where we must proceed One Step At A Time, and support causes like the Stamp Out the Debt campaign. But to support a movement which will not even acknowledge—let alone begin to think about challenging— the root cause of world poverty, is to make sure that the “real world” continues to be one in which human beings needlessly die and the Earth is systematically ravaged in the name of profit.

Andrew Thomas