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Debt slavery, neo-colonialism and neoliberalism

Posted April 16th, 2011 at 05:12 PM by Solidaire
Updated December 4th, 2012 at 04:33 AM by Solidaire

One of the most fundamental reasons for the poverty and underdevelopment of Africa (and of almost all "third world" countries) is neo-colonialism, which in modern history takes the shape of external debt.

When countries are forced to pay 40,50,60% of their government budgets just to pay the interests of their enormous debts, there is little room for actual prosperity left.

International debtors are the modern colonialists, sucking the marrow of countries; no armies are needed anymore to keep those countries subjugated. Debt is the modern instrument of enslavement, the international banks, corporations and hedge funds the modern colonial powers, and its enforcers are instruments like the Global Bank, the IMF, and the corrupt, collaborationist governments (and totalitarian regimes) of those countries, supported and propped up by these neo-colonials.

In reality, not much has changed since the fall of the great colonial empires. In paper, countries have gained their sovereignty, but in reality they are enslaved to the international credit system.

The only thing that has changed, is that now the very colonial powers of the past, are threatened to become debt colonies themselves. You see, global capitalism and credit system has no country, nationality, colour; it only recognises the colour of money, earned at all cost by the very few, on the expense of the vast, unsuspected and lulled masses.

Debt had always been a very efficient way of control, either on a personal, or state level. And while most of us are aware of the implementations of personal debt and the risks involved, the corridors of government debt are poorly lit, albeit this kind of debt is affecting all citizens of a country and in ways more profound and far reaching into the future than those of private debt.

Global capitalism was flourishing after WW2, and reached an apex somewhere in the 70's. The lower classes in the mature capitalist countries had gained a respectable portion of the distributed wealth, rights and privileges inconceivable several decades before. The purchasing power of the average American for example, was very satisfactory, fully justifying the American dream. Similar phenomena were taking place all over the "developed" world.

Somewhere around that time the capital figured a way to start taking back all those granted privileges and wealth distributed portions. Its weapon was globalisation. No longer was it tied to a country, susceptible to union pressures, civil rights and socialist governments; it could now invest and produce in undeveloped countries, with cheap labour costs, low taxation and malleable governments. The result of this was huge earnings for those multinational corporations, but also unemployment, financial bleeding, and economic loss back home. The money earned by the globalised capital but not re-distributed in the industrialised nations, led to the fall of the purchasing parity of their citizens, less consumption, less development and financial crises. But a new "remedy" was found for this disease also; and this was credit.

In order to keep up his established standards of life, a citizen could now live on borrowed bank money. Despite the fact that unemployment had become a systemic disease of the West, and that wages had stagnated, or in any case didn't follow the boom of post war era, consumerism had to keep up its pace, and even accelerate. If not for credit, it would be impossible to keep up this model of development without the capital sacrificing a large portion of its foreign-made earnings.

States also fell into the trap of debt, for various reasons, including political favour gained via social benefits and tax relaxation, loss of tax income due to unemployment, and flight of capital abroad to cheaper, underdeveloped countries. Governments became the best customers of the global credit system, either by necessity or by the need to stimulate the market by throwing money into it, and sustain the model of capitalistic growth.

So, in effect, the need of the capital to maximise its profits, led to globalisation, and the replacement of healthy financial domestic growth, depleted by financial globalisation, with cheap debt money. But, of course, debt money is not free money. On the contrary, it is extremely expensive, and the first step towards a perpetual enchainement.

Nowadays, there are trillions of dollars available for safe and profitable investments in the market. The international credit system has become so powerful, that it can exceed the authority of governments, dictate terms to countries, and enforce its will with internationally acknowledged institutions, like the IMF and the Global Bank.

Several countries have fallen prey to over-indebtedness, like Argentina, Ecuador and many Latin American countries. And although so far it was developing, or underdeveloped countries that fell victims to this form of colonialism by the international capital, under the doctrines of neoliberalism and the enforcement of the IMF, we are now witnessing this modern occupation moving to mature capitalist countries, like the Southern European ones, and Ireland. If this economic warfare is left unanswered, more vital economies will fall prey to debt slavery, like those of Spain, UK, Belgium, and ultimately the USA.

The followed plan is actually simple. Credit is offered in abundance, to governments either incompetent or corrupt, using it for their own political agendas and gains, or lacking in vision and responsibility to deny such slavery. In unstable, less developed countries, governments or dictatorial regimes are even more susceptible to such immoral loans.

Listen to the narrative of a former "economic hitman":
[ame="http://www.youtube.com/watch?v=0CofEbxtIxI&feature=related"]YouTube - Economic Hitman reveals shocking truths about the Government[/ame]

At some point, when government debts are no longer sustainable, or, to be precise, when those countries are so indebted that they cannot save themselves and are therefore effectively debt-enslaved, the credit market withdraws its confidence from certain countries. A critical instrument to guide the market are the rating agencies, like Standards & Poors, Fitch and Moodys. Those agencies are intertwined with Colossi of the banking credit system, like Goldman Sacks, financed by them, and, of course, serve their profiteering interests. When the credit system decides that a country has to go bankrupt, the rating agencies start downgrading its credibility, making it impossible for it to borrow money and serve its debt, thus enforcing it go bankrupt or call for the "help" of the IMF, and in the case of EU nations, the help of Euro stability mechanism (which also involves the IMF).
Greek crisis highlights shaky role for ratings agencies | Reuters

Now, the sole purpose of these interventions and external "help" is to protect the lenders and make certain that they will get as much money as possible and as much of the country's assets as possible. The "saved" country is in effect being turned into a colony of powerful corporations and banks, giving up its sovereignty in all but the papers. Where in the past it was armies that were required to achieve this, it now only takes a few decades (or years) of uncontrolled indebtedness.

The recipe is almost always the same:
The money offered to those bankrupt countries by the IMF, or by the EU, is used to repay the interest of previous debt, while being added to the current debt. This way, debt not only is not shrunk, but on the contrary, enlarged, further enslaving the afflicted country and pushing it deeper into the mire.
Tremendous austerity measures are enforced upon the people, with the alleged purpose "to cut expenses" and "minimise the government", while taxes are raised dramatically. All these lead to extreme poverty, unemployment, acute recession and tremendous loss of income, both for the people and for the government.
Social and economic structures of these countries are literally torn apart. Everything is sold (half price) to investors, following extensive privatisations, as the doctrines of neoliberalsm dictate. People lose not only their current income, but their future as well, being stripped away of any control of their country's natural wealth and important, strategic services.
When the country is picked clean and bleached dry of anything valuable, it is then left to go bankrupt, officially, and start from the beginning. Only now, it is a country owned by someone else, fully colonised financially and politically. And probably, prone to follow the same route again, as before. And perhaps, in a few generations, the international vultures will come and pick it clean again, when it is ripe and worth of something again.

It is a common practice to try and put the blame for the amassed debt on common people, making them obedient to repay it and accept the theft of their lives. During the Greek crisis, Greeks were presented as "lazy" (though official statistics show them as the 2nd hardest working people on the planet), corrupt, and fully responsible for their predicament. The racist attacks by the Bild media Colossus had only one purpose, to justify the robbery of a whole nation, and "sell off its islands", "sell off the Acropolis". Behind those articles are the same interests profiteering from this sell-off. The same kind of guided articles, in accordance with the interests of neoliberals, are reproduced for all indebted countries, trying to make people accept the guilt for debts not created by them.

The British will pay, the Portuguese, the Greeks, the Irish, the Germans (the latter have been austered for a decade prior to the crisis). The banking crisis of 2008, triggered by the collapse of the Lehman brothers, forced governments to intervene and save their banks, offering them money that led to more debt. After being saved, the same banks that gambled the global capitalist system away, started profiteering again on the expense of their saviours, the states, biting the hand that fed them. Sovereign debts have soared, and the banking bill was passed on to the people of these countries. Again.
This way, with public debts soaring, the credit system was presented with a first rate opportunity to pillage not only the usual suspects, the underdeveloped countries, but some of the developed ones also. And transform the West, taking back rights and living standards earned by decades of social struggles. The occasion was in favour of them, as the EU is governed by incompetent bureaucrats, lacking in vision and sharing the neoliberal economic ideals. In particular, the responsibility of the German government in this colonisation of part of Europe and its transformation to a neoliberal, Latin American model of Bananistan, is more than apparent, and history will judge it accordingly.

Meanwhile, the crisis, which is not only financial, but also political, social, and a crisis of human values, will spread, and is spread, all over Europe. The experiment performed in Germany, persuading unions and people to submit to austerity and wage freeze for a decade, with no apparent reason, in order to gain competitiveness and maximise German firms profits, was a successful one. Germany became an exporting giant, with a tremendous trade surplus. However, this gained wealth was not tasted by the Germans themselves, except for a few of them. Furthermore, the trade surplus of the German firms became the trade deficits of the rest EU nations, especially of the southern ones, tremendously enlarging their debts. What has started there, is enforced now in almost all European countries. The superpower of Europe, Germany, demands that its economic model is also exported to the rest of the EU, only now engrossed and maximised by the IMF/ECB demands.
The Euro, once thought to be the vehicle of European integration, has become the tool of European inequality, creating a sharp rift and dividing EU counties to rich and poor. It was an experiment that benefited only the industrialised Northern countries, while it had the same effect on the Southern ones as the pegging of the Argentinian currency to the dollar, prior to Argentina's bankruptcy. The effects of it were inevitable from the start.

The idea of [ame="http://en.wikipedia.org/wiki/Odious_debt"]odious debt [/ame]has been floating around from the early 20th century. It was used as the last line of defence by indebted countries, with certain success. It was also used by the USA when it won the Spanish-American war and gained control of Cuba, but also inherited its debt. The USA demanded, and managed, to strike off the debt of the former Spanish colony owed to Spain. Recently, the US has managed a "haircut" of the Iraqi debt, before moving in and taking over the country.

In the present financial crisis, no one has openly presented statistics and specific data about the debt of the Euro countries. To whom do the EU countries owe the money, when were they borrowed, by which government, under which terms and interest rates? Where did they go and where were they spent on? Did the people benefited from these borrowed sums? And why no one has ever told the people of the debt the governments were amassing on our behalf?

As representatives of the people, those governments did a poor job in representing the interests of their electorate. When someone borrows on my behalf, I want to know about it and have a saying in the deal struck, or outright object to it. Else, this is a shady deal.

For example, regarding the Greek sovereign debt, here is an interesting article:
The Siemens scandal and the doctrine of odious debt | Athens News
Huge (borrowed) sums were spent to stage the 2004 Olympics, with no apparent gain for the nation; certain firms, domestic and international, made huge earnings from the games and their preparation, though. Again, the bill was footed to the people.
Huge sums were, and are, spent for military purposes; money borrowed by German and French banks are given back to the German and French military industry, and everyone is happy. Except for the people who are left with the bill, again.
The Irish were called to pay for the debt of their private banks, a debt owed primarily to German and UK banks.

This is the model of neoliberalism: Gains are privatised, damages and losses are socialised.

There is absolutely no reason for the people to accept being submitted to debt slavery. There is no reason to trust governments that collaborate with international vultures like the IMF and accept to give away their country's sovereignty to money grabbers. There is no reason to accept this vile austerity and impoverishment, and the sell-off of national assets, while the lenders continue to make huge earnings. The chain of debt has to be broken, not shuffled around.
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  1. Old Comment
    Kuon's Avatar
    This is the model of neoliberalism: Gains are privatised, damages and losses are socialised.
    It sure looks that way. Excellent blog entry Solidaire.
    Posted April 17th, 2011 at 04:05 PM by Kuon Kuon is offline
  2. Old Comment
    Solidaire's Avatar
    Originally Posted by Kuon View Comment
    It sure looks that way. Excellent blog entry Solidaire.
    Your praise is highly valued; especially since my views are heretical by mainstream standards. Thank you.
    Posted April 17th, 2011 at 05:44 PM by Solidaire Solidaire is offline
  3. Old Comment
    Gile na Gile's Avatar
    Great overview Solidaire; historical depth and a contemporary range which shows how the neoliberal debt model is now stalking not only the "LDC's" but the OECD countries like our own. I think you could write a book by now (if you already haven't in reality) on the Greek debt crisis. If you haven't read it, Patrick Bond "The Looting of Africa" has a few good chapters on "phantom aid" and the hijacking of the HIPC intitiative post - Gleneagles; not that it wasn't already heavily anchored, as it was, by neoliberal 'take it or leave it' "growth" prescriptions.

    Conditionality loading remains the order of the day plus much of the debt that was written off could never be paid anyway and as Perkins has consistently shown the credit outlay supervised by the G8/IMF/World Bank troika is very much a racket at times to generate market access to often select multinationals.

    Senegal's Wade when asked to explain his country's conspicious switch to Chinese funding in the late 90's, was one of many who pointed to the endless conditionalities required of the multilateral lenders. But this also opens up the whole question of having the principle of odious debt accepted as greater oversight on contemporary loans and thus a further focus on "good governance" (as defined in the neoliberal sense) would be further entrenched.

    Corruption however is still real and pervasive in many of the countries seeking debt write-offs and it is the complications residing in this area of the debate that NGO's such as Drop the Debt and the Jubilee Campaign have failed to tackle convincingly. Sooner or later their arguments will have to confront it as the merits of their case are being steadily drained in this ideological war by a much better funded opposition.
    Posted April 18th, 2011 at 04:50 PM by Gile na Gile Gile na Gile is online now
  4. Old Comment
    Solidaire's Avatar
    Thanks for the comments and the nice tips Gile na Gile.

    And no, I haven't written a book on the Greek debt crisis, nor would I have been able to; it would have to be funded by loaned money anyway, kind of ironic, don't you think, to write against debt by indebting yourself.

    It seems you are an expert on African modern history yourself, great blog entries by the way.
    Posted April 23rd, 2011 at 02:46 AM by Solidaire Solidaire is offline
  5. Old Comment
    I need your help for me! In what ways the English colonies develop differently from the Spanish and the French colonies?
    Posted August 26th, 2017 at 09:36 AM by jadewilliams jadewilliams is offline

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