Life or Debt? How the IMF Keeps Africa Down

Summary

In 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

00:00

🌍 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.

05:02

🏦 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.

10:02

💡 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.

15:02

🔍 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.

Keywords

💡Debt

Debt refers to the obligation or liability to pay a sum of money or to discharge other obligations. In the context of the video, debt is portrayed as a shackle holding down the African continent, with historical roots in colonialism and imperialism that have left many African nations capital-deficient and reliant on borrowing to fund development projects.

💡IMF

The International Monetary Fund (IMF) is an international organization that aims to stabilize the global economy. The video discusses how the IMF's policies, particularly its advocacy for austerity measures, have been used as a mechanism of control and subordination, exacerbating the debt issues in African countries.

💡Austerity Measures

Austerity measures refer to policies of reducing government spending and increasing taxes to decrease budget deficits. The video highlights how these measures are often imposed on African countries by the IMF, leading to cuts in essential services like health and education, which is contrary to the needs of these countries for development.

💡Colonialism

Colonialism is the policy and practice of a power in dominating another country or area for the purpose of economic and political gain. The script discusses how the legacy of colonialism has contributed to the current debt situation in Africa by extracting resources and not investing in sustainable development.

💡Neocolonialism

Neocolonialism refers to the practice where powerful nations exert influence over less developed countries in a manner similar to colonialism, short of direct control. The video connects neocolonialism with the current debt mechanisms that continue to exploit African nations.

💡Infrastructure

Infrastructure refers to the basic physical and organizational structures needed for the operation of a society or enterprise. The video emphasizes the importance of infrastructure for development and how the lack of capital forces African nations to borrow to build necessary infrastructure like hospitals, schools, and roads.

💡Capital Deficiency

Capital deficiency refers to a lack of sufficient funds or resources to finance activities or investments. The video describes how African countries are capital deficient due to historical exploitation and are thus forced to borrow, leading to a cycle of debt.

💡Global South

The Global South refers to countries in the Southern Hemisphere that are generally economically disadvantaged and underdeveloped. The video uses this term to describe countries that are struggling with debt and the IMF's austerity measures.

💡Private Debt

Private debt refers to loans and other forms of debt issued by non-government entities. The video discusses how, due to the World Bank's failure to provide sufficient low-interest loans, African countries have turned to private lenders, often at higher interest rates, further trapping them in debt cycles.

💡China

China is mentioned in the video as a rising global power that has been providing loans and infrastructure development to African countries. The script addresses the geopolitical narrative that frames China as a cause of debt problems in Africa, contrasting this with the positive views of China held by many Africans due to visible development成果.

💡Debt Trap

A debt trap occurs when a borrower must take on new debt to fulfill the obligations of old debt, creating a cycle that is difficult to escape. The video uses the term to describe the situation of African countries that are unable to invest in their own development due to the need to service existing debt.

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