Life or Debt? How the IMF Keeps Africa Down
Summary
TLDRIn this discussion, Grieve Chelwa, Director of Research at the Institute on Race, Power, and Political Economy, addresses the issue of African debt and its connection to historical colonialism and imperialism. He explains how African nations, lacking sufficient capital for development, are forced into cycles of borrowing and debt, which are used as tools of control and subordination by Western powers. Chelwa also discusses the role of the IMF and World Bank, the rise of private debt, and explores alternative solutions such as regional currency arrangements and new development banks.
Takeaways
- 📈 Debt is a mechanism of control used to maintain a global power structure, particularly affecting African countries.
- 🏛️ Historical factors like colonialism and imperialism have left many African nations capital deficient, leading to a reliance on debt.
- 🌐 The IMF and World Bank were established post-WWII to help with development and financial crises, but have been criticized for promoting Western interests.
- 💸 African countries often borrow from private lenders at higher interest rates due to the World Bank not fulfilling its intended role.
- 🏥 Austerity measures recommended by the IMF can hinder development by cutting spending on essential services like health and education.
- 🌱 Alternatives to the current debt system include regional currency arrangements and new development banks that offer low-interest, long-term financing.
- 💼 Multinational corporations headquartered in the West make it difficult for African countries to collect tax revenues, contributing to capital deficiency.
- 🌍 China's role in African debt is complex and not as one-dimensional as it's often portrayed; it has been a significant contributor to infrastructure development.
- 📊 The narrative of a 'debt trap' created by China is a geopolitical posturing that oversimplifies the situation and ignores the West's historical role.
- 🔄 The cycle of debt in African countries is perpetuated by a lack of capital for development, leading to a reliance on loans with high interest rates.
Q & A
What is the main theme discussed in the conversation?
-The main theme discussed in the conversation is the issue of African debt and how it is tied to historical and ongoing global power structures, including colonialism, imperialism, and neocolonialism.
How does the history of colonialism and imperialism contribute to Africa's current debt situation?
-Colonialism and imperialism led to a lack of sufficient capital within African nations, as resources were often extracted to benefit the colonial powers. This historical legacy has left many African countries capital-deficient, forcing them to borrow to fund necessary infrastructure and development.
What role do international financial institutions like the IMF and World Bank play in Africa's debt?
-International financial institutions like the IMF and World Bank are seen as tools that project Western power and maintain a global power structure. They often impose austerity measures and conditions on loans that can trap countries in cycles of debt and subordination.
Why do African countries continue to borrow despite the debt cycle?
-African countries continue to borrow due to a lack of sufficient internal capital to fund essential infrastructure and development projects. This capital deficiency is a result of historical exploitation and ongoing economic pressures.
What is the impact of the COVID-19 pandemic on African economies and their debt situation?
-The COVID-19 pandemic has exacerbated the economic challenges in African countries, making it more difficult for them to recover and further entrenching them in debt cycles due to the need for additional loans to cope with the crisis.
How does the Ukraine war affect African countries in terms of debt and economic stability?
-The war in Ukraine has led to shortages and increased prices for commodities such as oil and fertilizers, which are critical for African economies. This has put additional strain on countries already struggling with debt and economic instability.
What alternatives are discussed to break the cycle of debt in African countries?
-Alternatives discussed include collective efforts to tax multinational corporations more effectively, bypassing the US dollar through regional currency arrangements, and establishing new development banks that offer long-term, low-interest loans for infrastructure projects.
What is the role of China in Africa's debt situation, and how does it compare to Western lenders?
-China is a significant lender to African countries and has been involved in infrastructure development. However, the role of China is complex and often involves geopolitical dynamics. While Western lenders are sometimes criticized for their historical role in creating debt cycles, China's involvement is seen by some as a new dynamic in the debt landscape.
How do African countries view their relationship with China compared to traditional Western powers?
-Many African countries view their relationship with China positively, as they see tangible infrastructure and development outcomes. This contrasts with their historical experiences with Western powers, which have not always resulted in visible development benefits.
What is the significance of the G20 Common Framework Debt mechanism in the context of African debt?
-The G20 Common Framework Debt mechanism is significant as it represents an international effort to address debt sustainability in low-income countries. However, it has become controversial, with debates about who should bear the burden of debt relief, often pitting China against Western countries.
What are the implications of the IMF's push for austerity measures in African countries?
-The IMF's push for austerity measures can limit the ability of African countries to invest in essential services and development, potentially worsening inequality and perpetuating cycles of poverty and dependence on debt.
Outlines
🌍 Colonialism and Debt in Africa
The paragraph discusses the long-standing debt issues in Africa, attributing them to historical factors such as colonialism and imperialism. The guest, grief showa, explains how these factors have left African countries capital-deficient, necessitating borrowing to fund essential infrastructure and development. The conversation highlights the role of debt as a mechanism of control and subordination, especially with the IMF's push for austerity measures during economic hardships, exacerbating the situation post-COVID and due to the war in Ukraine.
🏦 IMF and World Bank: Tools of Western Dominance
This section delves into the geopolitical capture of financial institutions like the IMF and World Bank by Western powers, turning them into tools for maintaining dominance. The IMF's headquarters in Washington DC and the appointment processes of its leadership are highlighted as evidence. The paragraph discusses how these institutions push for austerity in developing countries, contrasting with Western responses to economic crises, which often involve increased spending. The conversation also touches on the role of private lenders and China in the African debt landscape.
💡 Alternatives to Western-Led Financial Systems
The discussion in this paragraph focuses on potential alternatives to the current financial systems dominated by the West. It suggests that countries in the global South are exploring ways to collect tax revenues from multinational corporations, establish regional currency arrangements to bypass the US dollar, and create new development banks akin to the BRICS Bank. These alternatives aim to provide the necessary capital for development without trapping countries in debt cycles.
🔍 China's Role and Geopolitical Posturing
The final paragraph addresses the complex role of China in Africa's debt situation, amidst geopolitical tensions. It contrasts the West's narrative of China causing a 'debt trap' with the actual on-ground experiences and perceptions of African countries, which are generally positive towards China's contributions to infrastructure development. The paragraph also discusses China's early actions to suspend debt payments during the COVID-19 pandemic and the complex dynamics of debt negotiations involving China, Western countries, and hedge funds.
Mindmap
Keywords
💡Debt
💡IMF
💡Austerity Measures
💡Colonialism
💡Neocolonialism
💡Infrastructure
💡Capital Deficiency
💡Global South
💡Private Debt
💡China
💡Debt Trap
Highlights
Debt mechanisms are designed to institutionalize a certain global power structure.
African continent's history of colonialism, imperialism, and neocolonialism has led to a lack of sufficient capital for development.
Countries in Africa are capital deficient and must borrow, similar to how low-wage workers turn to payday lenders.
Debt is used as a mechanism of control and subordination.
IMF advises countries in the global South to institute austerity measures during economic hardships.
The IMF and World Bank were established post-WWII to help with development and financial crises but have become tools of Western power projection.
The IMF is headquartered in Washington DC, and its managing director is effectively picked by Western countries.
African countries are trapped in debt cycles, taking out lower interest loans to pay off higher interest ones.
The World Bank has not been performing its role of supplying long-term capital at low interest rates.
Alternative lenders have emerged due to the World Bank's failure to provide sufficient capital for development.
Countries in the global South are exploring ways to collect tax revenues from multinational corporations.
Regional currency arrangements are being considered to bypass the US dollar and reduce dependency on the Federal Reserve.
New development banks like the BRICS Bank aim to provide infrastructure financing without trapping countries in debt cycles.
China's role in African debt is complex and involves geopolitical posturing from Western powers.
China has been blamed for Africa's debt issues, but the situation is more nuanced, with China offering alternatives like suspending interest payments during the COVID-19 pandemic.
African views on China are generally favorable due to visible infrastructure development funded by Chinese investments.
The report from the Tri-continental Institute for social research provides a comprehensive analysis of Africa's debt situation and explores alternatives.
Transcripts
so we want to just jump right into it
here and we want to start off our
conversation by discussing the shackles
of debt that have been holding down the
African continent for decades and we are
very honored to be joined as we continue
the show by grief show well who is the
director of research at the institute on
Race power and political economy at the
new school grief thank you so much for
being with us here in the show
uh Eugene and Rania thanks for having me
it's an honor and a pleasure well the
pleasure is really all ours and you know
recently you worked uh on a fantastic
dossier I have to say from the
tri-continental uh Institute for social
research about exactly this issue of
African debt and I was hoping to start
you could maybe just sort of set the
frame for us a little bit because one of
the things I thought was most
interesting in the report is you know
whether we're talking about the rise of
the IMF debt regimes uh in the mid-1970s
uh or the rise of the huge explosion of
private debt and the early part of this
Century it seems like this is not just
sort of a a neutral reality that was set
forward but that the debt mechanisms are
designed to institutionalize a certain
Global power structure so I was hoping
you can just talk a little bit about
that
uh you're right Eugene I think that as a
mechanism of control I think is the way
you've you've put it and uh it's worth
for your listeners and viewers to sort
of understand why is it that the African
continent uh in many ways seems to be
addicted to debt it looks like it's
addicted to debt but I think it's
important to understand that history has
gotten us to this point right so the
history of colonialism the history of
imperialism the history the current uh
uh moments of neocolonialism have gotten
us into this kind of situation where
many of our countries are always lacking
in the sufficient Capital to do what
they need to do right so uh you know you
know countries need to put up
infrastructure we need to invest in
hospitals schools roads electricity that
kind of stuff that's really important
and the precondition for development but
we do not have sufficient Capital
internally why is it that we don't have
sufficient Capital internally because a
lot of our capital is Spirited Away to
the West right so we then find ourselves
in this kind of situation where we are
capital deficient and because we're
Capital deficient we then have to borrow
not unlike the situation of like a low
low wage worker who is exploited and
extracted and they have no choice but to
go to a Payday lender as is the case in
the U.S right so this is similar to what
uh to the African situation and because
of that we go through these cycles of
debt and that debt like you were saying
Eugene is used as a mechanism of control
it's a mechanism of subordination and
all those kinds of things
and it's interesting you know this is
happening right now where you see this
see the cycle of IMF going around the
world uh advising countries in the
global South whether in Latin America or
the Middle East or Africa or Asia to
Institute even more austerity measures
in a time when a lot of countries are
suffering from the aftermath of covid
for one I mean coven destroyed kova
destroyed a lot of economies uh in ways
that the global South had a much more
difficult time bouncing back from if it
hasn't really done that actually and
then moreover we have this war in
Ukraine uh that has you know led to
shortages of certain items I know you
know I live in Lebanon for example and
the country's cash drop because of its
own economic crisis on top of the fact
that oil fertilizer prices of all these
raw Commodities you know went like shot
up uh and so right now it seems as
though the IMF is going around to a lot
of African countries and trying to pers
you know push for more austerity can you
talk a little bit about what exactly the
IMF is demanding right now and if it's
any different than in the past
uh run yeah that's a good question and I
think again tying up to the question
Eugene asked earlier we have to
understand so essentially the IMF the
World Bank and other International
financial institutions particularly the
MF and the World Bank when an idea that
came out of the establishment of the
United Nations right so when United
Nations was established right after
second world war
um there was a thinking and I think I
mean it's a bit tricky to assess whether
the United Nations has been a net good
or not but I think uh I think it for a
while the UN did play quite an important
role I think for example the movement to
the politically decolonize many of many
countries in Africa for example I mean
that idea uh was given quite some
Credence by the U.N anyway so the World
Bank and IMF came out of this settlement
after second world war and the idea
itself was a good idea the idea was
essentially to say uh look
we are always going to have crisis of
one one form or the other and as
brothers and sisters we need to look out
for each other so we're going to
establish two organizations the World
Bank to finance long-term development
and then the IMF to sort out short-term
financial crisis like the one that
Lebanon is going through or the one that
many countries in the global South I'm
going through so a great idea on paper
now the sad thing is that this great
idea on paper became captured by the US
and Western Europe right it became
geopoliticized these two entities became
tools of projecting Western power and if
that's why it's no surprise that IMF is
headquartered in Washington DC the World
Bank is headquartered in Washington DC
the president of the World Bank is
effectively picked by the President of
the U.S and the managing director of the
IMF is effectively picked by Europeans
right so one has to understand this uh
and because of this and because there's
this you know the West wants to maintain
dominance you know economic dominance
it's you for for capitalism for example
to have subservient countries to provide
the raw materials that powers the
engines in the in the center and the
core in the Metropole right so it all
this when when you think about all this
stuff it then makes sense to have
austerity right for the for the IMF to
sweeping into a country in the global
South instead of saying you are in in an
economic crisis moment and you ought to
be spending more particularly on the
poor particularly on the working class
particularly on marginalized communities
that's what you ought to be doing after
all that's what often happens in the
west when there's an economic crisis you
don't do austerity you do the reverse
but again it all makes sense where the
AMF comes over here and they say cut
spending cut spending on health
education and those kinds of things
precisely because we want to maintain
you in a state of Perpetual subservience
right so I I hope this kind of it was a
roundabout way around you of answering
your question but I had to do that to
get to this point yes no I I there's
there's so many layers to it and
obviously there's so much obfuscation of
it you know is uh and I'm sure you've
seen this you know the Keel Institute in
Germany has just released their new
database on on African debt and there's
a range of things that it reveals but
one of the things I thought was
interesting is they examined the rates
of interest of the various types of
loans and of course the the private
loans were you know significantly higher
than almost everything else coming from
the bond market and so on and so forth
and they were they were noting that you
know some of the African countries have
become so trapped in these debt cycles
that they're taking out lower interest
loans to pay off the higher interest
loans and it's just an unbelievable
cycle so that almost nothing is really
being paid towards the actual needs of
the country to some degree it just now
becomes as you said like a Payday lender
sort of reality so I was hoping you
could talk a little bit about you know
that aspect of of how the various
different types of lenders are you know
who is out there the IMF there's China
we hear a lot about there's private uh
loans but how those things sort of
interact as well
um that's true and I I think I mean the
core there's a core fundamental issue
which is that a lot of countries in the
global South particularly in Africa have
a deficiency a deficient in capital
coming you know in sort of funds to fund
these large-scale development projects
uh Eugene you can't develop without uh
sufficient electric power you can't
develop without laying out a road
Network without a Communications
infrastructure these things are
incredibly critical and many of these
countries again were built were built
bad set of cards from colonialism
because all that colonialism did was
build infrastructure that supported the
extraction of of raw materials to feed
the beast in the west right so a lot of
these countries are trying to play
catch-up right and they're desperate for
Capital the World Bank was supposed to
be performing this role of supplying
long-term capital at very low interest
rates at what they call concessional
interest rates but the World Bank for
geopolitical reasons like I just uh
Illustrated a short while ago uh two of
you know Western power doesn't want to
do that because if the World Bank does
its job properly then a lot of these
countries in the global South will be
self-sustaining they'll stand on their
own and then nobody can push them around
so because the World Bank hasn't been
performing this role right a lot of loan
sharks or shine locks or whatever you
want to call them have popped out of the
Woodworks right so it is not the case
that the Zambian government for example
chose to go borrow from private lenders
at higher interest rates that wasn't a
choice they made they were forced into
doing that precisely because of the
reasons that I've just given and so that
that's what explains this sort of
different profile of lenders right it is
a reaction or response to the fact that
the ins the multilateral institutions
that are supposed to coordinate all this
for us in a brotherly and sisterly way
in a Peaceable way haven't been doing it
and therefore you know again I like this
analogy of payday lending uh folks don't
go to pay their lenders because they
want to you know they do it because the
shutout of the actual form of financial
system uh either by you know either they
have high credit scores there's a lot of
racism discrimination all sorts of stuff
so I think I think that's important to
illustrate uh why we have this different
profile of lenders
I also you know I wanted to ask because
the argument's always made in the
general consensus in the mainstream
really around the world is that in order
for these countries to do better
economically and to deal with all this
debt they have to take out not only more
loans but they have to again Institute
all these austerity measures that keep
them from you know developing properly
and so one of the things that I think is
important is to talk about there are
actual alternative ways to deal with
these sorts of things if these countries
were allowed to and if it wasn't up to
the US and the Europeans and these
financial institutions like the IMF that
they control so can you talk about some
of those alternatives
yeah you're right and I think so the the
issues the fundamental issues this
deficiency of capital right so how are
we going to get hold of this Capital how
do we get this Capital that we really
need to power our own development the
first thing for example is
transnational corporations or
multinational the big big companies that
operate across many borders most of most
of whom are headquartered I I don't I
can't even think of any exception but
many of them headquartered in the west
make it incredibly difficult to be able
to collect tax revenues I mean they just
make it incredibly difficult right so
what some countries in the global South
are trying to do is to get together and
figure out is there a way we can work
together to make sure that we can we can
begin to taxes multinationals that
extract lots of profit from our
countries and then they put it away in
tax Havens right you know in in in sort
of in tax Havens there now to be able to
do that you've got to work together so
like there's some experiments in Latin
America some Latin American countries
are trying to get together for example
to try and uh and work together and find
a mechanism of collecting some of this
tax revenue which will go a long way in
closing this capital deficiency Gap that
I just spoke about another mechanism
which countries are trying to experiment
with in the in the global South
particularly Latin America Latin America
is very interesting place because
they're very imaginative they're very
imaginative in trying to think about
Alternatives so can we find a way of
bypassing the US dollar because again
that's a problem a lot of our debt is
dollar denominated debt which puts us at
the mercy of the U.S Federal Reserve
Bank right but can we find a mechanism
of of doing this some of these
transactions uh by bypassing the dollar
so can we establish Regional currency
arrangements for example I think the new
president of Brazil but then again new
president he was there before he's come
back again has proposed this idea of the
Sue I think it's s-u-r right original
currency that can facilitate trade and
finance right so those are some some of
the some of the many and other types of
examples can we come up with alternative
development backs new types of
Development Bank that can perform the
role that the World Bank was meant to
perform but that they've neglected to do
I think you might have heard of the new
development Bank AKA brics bank that's
headquartered in Shanghai China uh who's
uh president who the president of brics
bank is Duma Rousseff the former
president of Brazil and the new
development Bank bank has a simple
mandate they want to do development
financing in a brotherly ancestry way
with very low interest rates for a very
long maturity very long term and to
finance infrastructure development in a
way that facilitates development and
doesn't trap these countries in cycles
of debt so Rania those are some of the
Alternatives and I think there are many
that have been floating around and these
things are not new these things are not
new many of those who've come before us
have proposed them and so on and so
forth so there are many many types of
alternatives
and I wonder how you also evaluate this
issue of you know the role China is
playing I mean obviously in the G20
common framework debt mechanism this has
become the most controversial issue
um with the West essentially saying that
they are refusing to address anything
regarding Zambia's debt Ethiopia's debt
I guess you know Chad it's a little bit
different but whatever they're
essentially saying that they want China
to be the first mover with the
implication being that China is the
biggest problem
um and thus you know the the whole debt
trap narrative so I wonder how you
evaluate that
uh thanks for bringing that up Eugene
and I mean obviously the truth is much
more complex and again it's a game of
geopolitical posturing that's going on
right so China is a rising power some
people the power the old powers are not
very happy with this there's a new kid
on the Block so the new kid on the Block
is getting all the flaps that's
essentially what's going on here uh I
mean certainly China is not being
insincere but because China is asking a
couple of questions for example one of
the most interesting thing about how we
think about sovereign debt Eugene and
Rania is that
lateral development Banks like the World
Bank for example are required not to
take required not to take a haircut so
they have also lent money and they are
saying we want to get paid for a hundred
cents on the dollar we want to get paid
hundred cents of the dollar we're not
going to take a haircut in the case of
Zambia somebody else should take a
haircut and maybe China should take a
haircut and then the standard play China
is saying why should I take a haircut
whilst you are refusing to to take a
haircut World Bank after all much of
these problems have been created by you
guys so that's some of the dialogue and
some of the deliberation which kind of
makes sense right also the hedge funds
the sort of U.S Western European hedge
funds also I've got a road to play in
this so they also say we don't want to
take a haircut China should take a
haircut because China caused this but
that's not that's not really true and I
think one of the most interesting thing
Eugene and Rania is that when you do a
survey on the African continent and you
ask say the typical African and say
what's your view of China right
and and surveys have been done on this
many many people respond by saying we're
kind of favorable and it makes sense why
would they say this because they can can
kind of see the fruits of our
interactions with China if you come to
many African Capital Cities Eugene you
see that infrastructure landscape has
changed you can see highways you can see
hospitals you can see Power stations and
then many asking the question oh we've
been dealing with the US for quite a
while now we've been dealing with
Britain for quite a while now but we've
never really seen some we've never seen
this kind of tangible fruits of
friendship right so I think this is
what's going on here and I think China
has been blamed uh when the truth is
much more complex and when China has
really been trying to play a ball in the
in the era of covet for example when
covet broke China was one of the first
countries and I think one of the few
countries to suspend interest payments
on debt that was ought to it right so I
mean this this is some of this is some
of the complexity in there uh and also
there's geopolitical posturing the fact
that there's a new kid on the Block
well I hope everyone checks out the
Fantastic report from April life or debt
the Stranglehold of neocolonialism and
Africa search for Alternatives from The
tri-continental Institute for social
research where you grieve showa are a
senior fellow thank you so much for
joining us and giving us some of your
very precious time I'm sure here on the
freedom side
thanks Eugene and running for having me
fantastic pleasure
Посмотреть больше похожих видео
Kenya’s Youth Are Rising Up Against U.S.-IMF Control and Aren’t Backing Down
Why China Is in Africa - If You Don’t Know, Now You Know | The Daily Show
Prof. PL Lumumba discusses IMF and World Bank Agenda for Africa.
How MONEY & BANKING Really works - Part 1 (3 of 5)
Government Debt and Deficits Are Not the Problem - Private Debt Is
China in Africa: should the West be worried?
5.0 / 5 (0 votes)