Debt and Poverty

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Debt and Poverty

• SAAPE Katmandu 10 January 2009
• Eric Toussaint
• President CADTM Belgium
• www.cadtm.org
• www.oid-ido.org
• Contact eric.toussaint4_at_gmail.com

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Change in total debt stock compared with the
total net transfer on the public external debts
in South Asia
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World Bank discovered suddenly 400 more million
poverty-ridden people

• In September 2008, the World Bank acknowledged
  that there were major errors in its calculations
  concerning the poverty situation worldwide1. In
  fact, while  estimates of poverty established by
  the World Bank are improving thanks to more
  reliable data about the cost of living , the
  result is in itself a brutal challenge to the
  statistics produced by an institution that has
  been going through a serious legitimacy crisis
  for several years suddenly the World Bank has
  discovered that  400 million more people than
  previously estimated live in poverty . Thats
  more than half the population of Sub-Saharan
  Africa!
• 1 See http//go.worldbank.org/MLVZFZTMS0

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• According to its information release, 1.4
  billion people in the developing world (1 in 4)
  were subsisting on less than 1.25 dollars a day
  in 2005, whereas previous estimates were around
  1 billion people. With errors like this in World
  Bank poverty calculations, the whole edifice of
  current international anti-poverty policies falls
  apart.

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World Banks Statistics on Poverty (Source Chen
et Ravallion, 2008)
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World Banks Statistics on Poverty (Source Chen
et Ravallion, 2008)
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World Banks Statistics on Poverty (Source Chen
et Ravallion, 2008)
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World Banks Statistics on Poverty (Source Chen
et Ravallion, 2008)
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World Banks Statistics on Poverty (Source Chen
et Ravallion, 2008)
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World Banks Statistics on Poverty (Source Chen
et Ravallion, 2008)
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World Banks Statistics on Poverty (Source Chen
et Ravallion, 2008)
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Structural Adjustement policies
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What are the short-term or shock measures imposed
by Structural Adjustment, and what are their
consequences?

• The end of subsidies on products and services of
  primary necessity bread, milk, rice, sugar,
  fuel, electricity
• A drastic reduction in social expenditure.
• Devaluation of local currency
• High interest rates

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What are the long-term or structural measures
imposed by Structural Adjustment, and what are
their consequences?

• The development of exports
• The complete opening up of markets through
  elimination of customs barriers
• The liberalization of the economy, especially the
  abolition of capital movement control and
  exchange control.
• A system of taxation which further aggravates
  inequalities, with the principle of value-added
  tax (VAT) and the protection of capital revenues.
  
• Massive privatization of public companies and
  subsequent retreat of the state from competitive
  sectors of production

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Joseph Stiglitz, Globalization and its Discontents

• Most of the advanced industrial countries -
  including the USA and Japan - had built up their
  economies by wisely and selectively protecting
  some of their industries until they were strong
  enough to compete with foreign companies. ()
  Forcing a developing country to open itself up to
  imported products that would compete with those
  produced by certain of its industries, industries
  that were dangerously vulnerable to competition
  from much stronger counterpart industries in
  other countries, can have disastrous consequences
  - socially and economically. Jobs have
  systematically been destroyed - poor farmers in
  developing countries simply could not compete
  with the highly subsidized goods from Europe and
  America - before the countries' agricultural and
  industrial sectors were able to grow strong and
  create new jobs. Even worse, the IMF's
  insistence on developing countries maintaining
  tight monetary policies has led to interest rates
  that would make job creation impossible even in
  the best of circumstances..

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United Nations, Report by the Independent Expert,
Mr. Fantu Cheru

• Structural adjustment goes beyond the simple
  imposition of a set of macroeconomic policies at
  the domestic level. It represents a political
  project, a conscious strategy of social
  transformation at the global level, primarily to
  make the world safe for transnational
  corporations. In short, structural adjustment
  programmes (SAPs) serve as a transmission-belt
  to facilitate the process of globalisation,
  through liberalisation, deregulation, and
  reducing the role of the State in national
  development.
• UN-HRC Effects of Structural Adjustment Policies
  on the Full Enjoyment of Human Rights, submitted
  in accordance with Commission decisions 1998/102
  and 1997/103 E/CN.4/1999/50

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Food Crisis 2007-2008

• According to the United Nations Food and
  Agriculture Organization (FAO)1, 848 million
  people were suffering from hunger between 2003
  and 2005, a figure comparable to that of 842
  million between 1990 and 1992. But the situation
  has deteriorated seriously due to the explosion
  in food prices and in September 2008 the FAO
  revised its estimate upwards, judging the trends
  to be worrisome2 923 million people were
  undernourished in 2007, including 907 million in
  the developing world. Of these, 583 million were
  living in Asia, 273 million in Africa and the
  Middle East and 51 million in Latin America. In
  December 2008, FAO estimated than the number of
  undernourished persons increased 40 million in
  2008.
• 1 FAO, Briefing paper Hunger on the rise,
  http//www.fao.org/newsroom/common/ecg/1000923/fr/
  hungerfigs.pdf
• 2 FAO, Hunger on the rise. Soaring prices add
  75 million people to global hunger rolls, Press
  release, 18 September 2008.

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• The idea that developing countries should feed
  themselves is an anachronism from a bygone era.
  They could better ensure their food security by
  relying on the US agricultural products, which
  are available in most cases at lower cost.
• John Block, US Agriculture Secretary, 1986

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