by Aparna Pallavi

“Debt is not just a financial thing,” says Lidy Nacpil, “Debt is about power and the exercise of power. As long as a government believes that it needs to borrow money, it serves the need of global capital to exercise power.”

Lidy is the international coordinator of Jubilee South, a Philippines-based global NGO forum monitoring the working of the international financial institutions (IFIs) like the World Bank, International Monetary Fund, the Japanese Bank and the Asian Development Bank and the debt situation in the Third World.

Lidy started her career as an activist campaigning for the end of dictatorship in the Philippines. In 1987, her first husband was killed by the military. Left alone with a baby daughter, Lidy continued to work for social justice. Since the year 1993, Lidy started working on issues of national debt and economic injustice. Today she is considered one of the international experts on the subject.

In Hyderabad recently to participate in the demonstrations against the Asian Development Bank organized by the Peoples’ Forum Against ADB (PFAADB) on the occasion of the ADB’s annual governor’s meeting, she spoke to this correspondent in detail about the exploitative tactics of the elite group of IFIs which allow them to exercise power under the guise of giving aid. Excerpts follow:
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Aparna Pallavi: Why do you talk about governments ‘believing that that they need loans’? Don’t we need loans for development?

Lidy Nacpil: It is a lie that IFIs are giving loans to ‘poor’ countries because they need capital. It is a lie that the goal of these organizations is poverty reduction and development. It is business lending, pure and simple. And the biggest lie is lie of the ‘poor’ countries – call them ‘poor’, developing’, ‘backward’, whatever. We call them the Global South, not in geographical terms but as a term of reference. The fact is that as of today, more funds are flowing from the Global South to the North than vice versa. The powerful countries are financing us with our own money. The so called poor countries are not poor at all – they are supplying huge amounts of riches to the rich and powerful countries while unable to retain any for themselves. If this plunder of the South stops, the so called poor countries would not have any need for loans.

Aparna Pallavi: You say that the South is supplying more funds to the North than it is receiving. Can you specify how?

Lidy Nacpil: There are many ways in which wealth is being leached from the South to the North. The first is debt service. The interest on accumulated loans in the countries of the South has piled so much that new borrowings are smaller than what we are paying back on pending loans. The Philippines, for instance, paid 800 billion pesos in capital and interest on accumulated debt in the year 2004, while it received 600 billion pesos in fresh loans.

The second is profit repatriation by transnational corporations. These corporations don’t always invest their own money. They come and borrow money within our own countries, make money on this investment and repatriate the profits.

Then the terms of international trade are unfair. Our labour is cheaper. Our goods are priced much lower than theirs in the global market. They dominate the market and drive down the prices of our goods. They force us to cut subsidies in vital areas like food, health and education while they don’t cut their own subsidies. They can flood our markets with their goods. We can’t do that. The net trade is in their favour.

Aparna Pallavi: But how does development happen if there are no funds?

Lidy Nacpil: How do you define development? Do the people of our countries really benefit from the ‘development’ that is achieved through these funds? What kinds of projects are being financed by these so called ‘development’ loans? Infrastructure projects, mega projects – roads, dams, pipelines, things like that. As soon as these projects are complete, they are followed by transnational companies with business plans. This ‘development’ is needed only to create a better environment for corporate investment by transnational companies from powerful countries, not for the people.

And what is more, they use their control over credit to enforce policy changes and reorganize economies to suit their own needs, to facilitate more efficient exploitation and generation of profit.

Not just this – they employ our technocrats, and in the name of technical assistance they manipulate research, ‘prove’ assumptions and legitimize their developmental aggression.

And they make the people pay for all this. People are dispossessed for their projects -- they service the debts that dispossessed them in the first place.
At Jubilee South we call these debts illegitimate debts.

Aparna Pallavi: Could you elaborate a little more on this last point?

Lidy Nacpil: We are not the debtors of the North, but their creditors. One hundred countries of the South have 2.3 trillion dollars worth of outstanding debts, but this amount is much smaller than what has been plundered from us. These debts are illegitimate because the historical, social and ecological debts of the North are far greater in magnitude than the money we owe them. They owe us for centuries of exploitation, and what is involved is not just money and production but lives and natural resources.

Even the financial debts are not our peoples’ debts – the people have not asked for them or benefited from them. Instead, the projects run on this money have had a destructive effect on community, livelihood and ecology. The IFIs are forcing the harmful policy of privatization on the countries of the South. The debts have served to undermine democracy and generate repressive and authoritarian governments. Look at the large scale violence and militarization that has happened in the wake of these projects – look at Burma, look at your own country where so many people have been displaced through the use of brute force – rape, murder, forced labour, what not.

Aparna Pallavi: Why do you think governments of the South go on incurring more and more debt when it is so harmful and regressive?

Lidy Nacpil: Most governments are short-sighted and their aim is limited to getting power and keeping it. They take long term loans knowing fully well that they won’t be in power long enough to pay them. They are also beholden to the Northern governments, which influence politics in the South. So they can’t afford to rock the boat. Past employees of IFIs are placed in key bureaucratic posts in our countries. They share the mentality of the IFIs, or are beneficiaries.

Also our own corporates benefit from these borrowings, especially those in collaboration with Northern corporates. Some such collaborations have been in existence since the colonial times. There is pressure from these corporate bodies. Many politicians themselves have ties with corporates – some own them. So naturally they vote in their favour.

Aparna Pallavi: What stand do you think the Global South should take on the debt issue?

Lidy Nacpil: Our stand is simple. Our slogan is, “Don’t owe, won’t pay”. Our call to the IFIs is to cancel all debts and stop lending to us altogether. One hundred percent cancellation of debts is what we call for. Our governments should repudiate the debts as illegitimate, and stop paying them. And it is not as if not paying these debts would land us in financial crises. We are paying in debt service more than what we borrow. So if we stop paying and they stop lending, we are the ones who would be at an advantage. That is why the powerful nations don’t want us to stop borrowing.

The countries of the North tell us that they will cancel the debts if the amount thus saved is used properly. We say that they have not moral right to dictate what is proper and what is not. We have our own definitions of what development model we wish to follow.

Aparna Pallavi: If the debt issue is so important, how come it has not made itself felt in election politics yet? Why is it not an election issue?

Lidy Nacpil: Debt is not an election issue yet, but it ought to be. There is so little information among the public over this issue – we are overawed by the apparent largeness of it. We think it is something that only economists can deal with. Leave alone the common public, even politicians are not aware of the realities of the situation. In Philipines, when we proposed a bill for the Filipino Congress to audit the debts, we had to first hold seminars inside the Parliament House to brief the politicians.

The responsibility for making debt an election issue rests with the people’s organizations. We have to undertake massive drives to educate the people on debt and related issues. The way the governments portray these issues today, it is as if the subject is so vast and complicated that only highly qualified economists can understand them. That is the best way to discourage the public from looking into these things. It is important for us not to be overwhelmed by this apparent complication and the largeness of the institutions. The issue is not too big for us to handle. We must take up the challenge. We may not see any drastic change in our lifetime, but if the future generations are to see change, we must act now to start building an alternative world economy.
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Aparna Pallavi is a freelance journalist based in India.