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DAVID SUTER
ODIOUS
JUBILEE 2000 vs THE INTERNATIONAL CREDIT CARTEL
BY DAN ARMSTRONG
I
Imagine a wondrous new machine, strong and supple,
a machine that reaps as it destroys. It is huge and mobile, some
thing like the machine of modem agriculture but vastly more
complicated and powerful. Think of this awesome machine run
ning over open terrain and ignoring familiar boundaries. It plows
across fields and fence rows with a fierce momentum that is
exhilarating to behold and also frightening As it goes, the
machine throws off enormous mows of wealth and bounty while
it leaves behind great furrows of wreckage It is sustained by its
own forward motion, guided mainly by its own appetites. (And) it
is accelerating. . . This machine is modem capitalism driven by the
imperatives of the global industrial revolution.
-W illiam G reider (from "O ne world , ready or not ')
There is a war being waged this very moment. A global
civil war. North against South. It may be that the bombs are few
and the gunfire sparse, but the casualties are high. It is a social
war wth a trickle down of debilitating debt from the wealthiest to
the poorest. The war machine is modem capitalism. Driven by
the imperative that money must make money. The war rooms
are offices on Wall Street, the financial districts of London,
Berlin and Tokyo. The field officers are stock brokers, financial
planners, bankers and currency traders. It is subtle. It is polite
It is silent. It is war just the same. The Third World War
The 1st World led by the Group of Seven (G7)1 has
funded 3rd World development over the last forty years through
a variety of commercial, multilateral and bilateral loans. In the
ideal, these development loans were to provide the wherewithal
for the LDCs (Lesser Developed Countries) to build infrastruct
ure, social programs, schools, raise health standards, a viable
economy and, eventually, a place in the global market. What
we have today is a gross perversion of that ideal.
Presently tiers upon tiers of interest payments on these
development loans swarm like locust across the globe, eating
the heart out of three-quarters of the vwrid — starting with the
weakest and youngest. Every 3rd World country labors under
debt — for most, it is vast crippling debt. Generations of loans
and restructuring programs enslave whole populations to
poverty, strip social programs of funds and place needless rush
on the harvest of natural resources. Development has occurred,
but piecemeal, and causing in more instances than not, as much
devastation as progress. Something has gone wrong.
The numbers have a limited relevance. Over a period of
time, relative values of dollars lose sense, but the compounding
nature of the problem is revealed by a few bulk figures — that
multiply every few years. In 1974, for instance, the world's LDCs'
debt totaled $135 billion. By 1980, it had grown to $567 billion.
Between the years of 1980 and 1992 indebted LDCs paid $1.6
trillion to their creditors. In that same time the total LDC debt
rose from $567 billion to $1 4 trillion. Similarly, between 1982
and 1996, the combined Latin American and Caribbean region
paid out $739 billion in debt servicing - more than its entire debt
in total, and yet that debt continued to grow All that is ever paid
is interest and service charges. The principle sits like a hungry
beast behind the treasury doors gobbling up every dollar of
export revenue and slurping down funds targeted for needed
social services. Real economic growth has stagnated and the
emerging 3rd World markets flounder in the global economy like
lifeboats around the-RMS Titanic Today the LDCs' debt tops the
$2 trillion mark and continues to grow like a virus. For better or
worse, some kind of change is in the offing
Sympathy for this predicament is hard to find among
the fortunate. From the perspective of the 1st World, these 3rd
World financial problems look like bad management, careless
spending and waste. But the situation is more complex than
conrupt government officials or self-interested dictators siphon
ing money from these loans to build private mansions or into
Swiss bank accounts. As much to blame are the banking
practices of the last 25 years and the rapacious appetite of
capitalist expansion.
Economic growth is everything to Western finance.
Despite the seeming benevolence of the G7's gift of develop
ment to the 3rd World, it is naive to imagine that the capitalist
machine is driven by anything but self-interest and profit A
margin here, a margin there, percentage gains make the capital
ist world go 'round In the eyes of commerce, the development
of the LDCs is primarily the expansion of markets because the
growth-based economy must forge new frontiers That is, money
looking for ways to become more money.
Capitalization through loans and credit is the universally
accepted method of 3rd World development. It has been going
on in one form or another since the end of the Second World
War. Records show, however, that once a loan is re-serviced
and economic conditionalities are imposed, things get very
tough on the debtor country Only a selected few of the develop
ing nations (South Korea was once considered one of these)
have been able to escape the initial pitfall of loan reconstruction
and then it's economic quicksand. It's true — examples of failure
greatly outnumber the successes. Development is an economic
tightrope in the free market arena — especially if you are enter
ing the G7 monetary system from the outside.2
Credit has been extended and extended again to the
Philippines, Indonesia, Malaysia, Mexico, all of South America,
and the sub-Saharan African nations. In a pattern that began
when the United States established the Development Loan Fund
in 1957 and Secretary of State John Foster Dulles announced
that all further U.S. foreign aid would be as a loan not as a grant,
over and over again developing countries have fallen victim to
the international credit card cartel's ponzi-like system Old loans
threatening to default are invariably propped up by new loans
that are saved yet again by another new loan
Because the principle is usually more than 90%
"synthetic," there is no real limit to how much "credit money"
can be created to sustain timely loan payments After many
generations of loan restructuring, which is frightfully common,
something of the principle of the original loan gets lost to
abstraction — only the steady demand of interest remains real.
The bank cares little of the principle anyway. All but a small
portion of that is merely pixels on a computer screen. It is the
loan fee and the interest payment that makes the wheel go
‘round
The international credit cartel had a firm grip on the
LDCs by the late 1960s. but the loans seemed to be working
then. There was development In the early 1970s, however, an
increasing Vietnam War debt forced the United States to take
the dollar off the gold standard In response to this, the Organi
zation of Petroleum Exporting Countries (OPEC) raised the
price of crude oil 70% because oil prices were set in American
dollars — which had begun rapid inflation when floated against
the other currencies of the world. This resulted in a surge of
dollar influx to the oil exporting countries, but at a reduced dollar
value So. as part of the agreement made with the G7 vtfien
OPEC raised its prices, the OPEC profits were invested in
special high interest 20 and 30 year certificates of deposit in
American banks 3
Huge portions of this OPEC money, multiplied by the
methods of fractional reserve banking (a $1 billion reserve
expands into more than $30 billion in loans!), were then loaned
by the Amencan banks to developing countries all around the
wrid. (This was known as "petro-dollar recycling" because these
loans would then allow developing countries to afford oil at the
new price.) In many cases, because the money was there to be
loaned, eager bankers offered sums well beyond the reasonable
canying capacities of the borrowng countries. Ten years down
the line, as sliding interest rates doubled and tripled in an effort
to arrest an inflating U.S. economy, the most indebted of these
nations, beginning with Mexico, were pushed to the edge of
default on their loans Such were the size of these loans (in
excess of $800 billion then) and the extent of their diversification
into other banks and holding companies, the wild financial
community, in its desperately complex interdependence, could
not allow these LDC loans to fail — for fear of bringing dowi
some large and very important banks In other wards, they
needed those LDC interest payments to keep the whole system
afloat
Noted journalist William Greider details this story in his
book on the Federal Reserve Bank, The Secrets of the Temple
(a Los Angeles Times book prize winner in 1988):
In a formal sense, this was the starting point for what
became known as the international debt crisis — actually, a
continuing series of crisis points, as one country after another
approached the brink of insolvency, then appealed for relief from
the Fed. the international lending agencies and private banks
Within the next year 14 other nations would undergo the same
trauma that Mexico experienced in August of 1982
accepting
C ontinued N ext P age
A lliance for D emocracy
GODFATHER S BOOKS
ANO ESPRESSO BAR
he Alliance for Democracy is a new movement
that seeks to end the domination of our economy,
our government, our culture, our media and the
environment by large corporations.
T
We have united to examine the ways in which various eco
nomic interests either enhance or harm the health of de
mocracy and we focus on creating basic change.
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