An interview with Ann Pettifor

by Julie A. Wortman

Ann Pettifor is co-founder and director of Jubilee 2000. Raised in South Africa, she has been working on issues related to the debt crisis for many years and is the author of several publications on the subject.

Julie A. Wortman: People have been stunned by the progress the Jubilee 2000 campaign has made since 1998. How close are you to achieving the goal of the campaign -- "the one-off cancellation of the unpayable debts of the world's poorest countries by the year 2000 under a fair and transparent process," to quote from Jubilee 2000 Coalition literature?

Ann Pettifor: We are still some way from that goal. At the beginning of this year I spoke with someone from the U.S. Treasury who assured me that we'd already achieved our goal, because we'd persuaded the U.S. to write off 100 percent of the debts owed to the U.S. by 25 or so of the poorest countries. Unfortunately, while that is true, that cancellation is only a part of the debt owed by those poor countries. It's only the debt owed to the U.S.; it's only the bilateral debt, the government debt. It doesn't include the debt owed to the International Monetary Fund (IMF) and the World Bank. We haven't got 100 percent cancellation of that yet.

Also, the creditors are insisting on focusing on only a narrow group of countries. We're calling for more countries to be included. The poorest countries do not yet feel their lives transformed by the decisions that have been taken.

JW: Where are you focusing efforts?

AP: At the beginning of this year the creditor nations, the governments of the West, said they expected 11 countries would have some debt cancellation by May or June. So because we realized that the creditors were not offering enough and were holding back, we began intensifying the pressure on, in particular, Japan, France and Italy, which had been dragging their feet and making very little contribution to this debate. This spring we've been campaigning in France and Italy, working with celebrities, churches and non-governmental organizations (NGOs). And in Japan we are now lobbying very heavily and preparing for an event or an action around the July G7 summit at Okinawa.

JW: What about people who worry that forgiving the debt is unrealistic?

AP: In Jubilee 2000 we don't talk about forgiving the debt, because the word forgiveness in this context implies that the debtor is entirely at fault and needs to be forgiven.We make a very strong point that debt is both the responsibility of the lender and also of the debtor -- both sides are responsible. Every day on Wall Street banks have to write off debts. It's a matter of economic reality and is absolutely vital to the economic health of the nation that banks accept that some debts will never get paid and that some businesses and some individuals just simply have to be given a chance to start again.

But although in everyday life this is something we take for granted, in the international financial system there is no law governing regulations between debtors and creditors. So creditors can keep debts on the books ad infinitum. And just as in Dickensian times it was possible to put people in jail and starve them to death if they didn't pay their debts, so today, instead of having debtors' prisons for people, we have debtors' prisons for countries. When we did it in the 19th century we found that it was economically counter-productive to starve people because the effect was that we were unable to collect the debts. Furthermore, they did not play a productive part in the economy. In exactly the same way it is unproductive to drain the poorest countries of all their resources, because we will still never collect the debts and they will never be able to play a productive part in the global economy.

JW: Is the debt crisis one of the negative results of our current form of globalization or a by-product?

AP: Debt is a necessary by-product of globalization. Despite all the hype, globalization boils down to one thing: the opening up of markets -- capital markets in particular. Globalization is driven by bankers and creditors and other financiers who want to open up capital markets around the world so they can lend money and thus make money from money. They've been opening up capital markets in Southeast Asia, in Africa, in Latin America. The result has been disastrous because when the companies and governments in these countries have borrowed foreign currency for their projects and have then been hit by, for example, the devaluation of their own currency, they have then found it impossible to repay those foreign debts.

The reason for this is that you've always got to repay foreign debts in dollars, or yen, or sterling and you cannot use a Thai baht or Mozambiquan meticals to repay your debt. To find those dollars, you've got to be able to have sturdy exchange rates or else you've got to be able to export goods that earn foreign dollars. But all of these debtor countries are engaged in primary commodities like coffee, cocoa, sugar and copper. And the prices of these are now at historic lows. So their income for repaying foreign debts has collapsed. But nevertheless they've been encouraged to borrow through these open capital markets.

JW: At the World Trade Organization meeting in Seattle last year there was a huge outpouring of popular concern about the effects of globalized economics, so it seems a lot of people understand at least some basic aspects of what is going on.

AP: Yes. It is as simple as balancing your own household budget. But so much of the time -- in the churches, especially -- economics is still a taboo subject. It's as if this is something that gentlemen in pin-striped suits can discuss, but no one else can. We have to lift the taboos about economics because there are elites in our country and in other countries who are using their understanding of economics to hurt our interests, and unless we understand what they're doing, we're not going to be able to determine our own futures and act as responsible democratic citizens should.

JW: You make the connection with household economics. If someone is going to take the Jubilee 2000 call seriously, what are some of the things they can do individually?

AP: Well, in our personal lives we have allowed money values to be superimposed on human values and we elevate money values above human values almost in everything that we do. We value everything in terms of money and we devalue that which is not worth money and which cannot be valued in money terms. So I think the first thing we have to do is to turn that around at the personal level and begin to say it is not important that I have money. It is not important that I have more money than the person next to me. It's not important that I wear this designer label and not that designer label. It's not important that I have this car and not that car. But what IS important is how I feel and how I act towards other people and how I value human life and animal life and ecological life -- above money.

The second thing we have to do is to realize that we are the victims of a credit culture. Not a week goes by in my house but a credit card application doesn't come through the door. I have two young sons who are just out of university and who are struggling to make a living and they are literally swamped with credit cards. But we have to start resisting this. We have to question the way in which the banks throw money at people. Of course, we know why they do! Making money from money is much easier than, for example, making money from tomatoes. To grow tomatoes I have to rely on the sun; I need rain; I need water; I need soil; and I have to wait over a period of time. With money, I just lend money, charge a decent price, which is called interest, and I make more money. We are becoming a society where making money from money is becoming one of the major sources of income. But it's also the major source of exploitation. So I think we need to question the easy credit that is a function of our society.

JW: I'm always noticing in the Episcopal Church's national newspaper a prominence of headlines about people in other countries suffering because of natural disaster or civil strife. What connections do you make between such headlines and the debt crisis?

AP: We tend to take a fatalistic view of the world and believe that when a hurricane strikes that, A, nature wants it to happen and B, there's very little that we can do about it. Well, for a start, we know that there's an increase in the rate of these kinds of natural calamities and it has very much to do with what we're doing to the environment. And what we're doing with the environment has very much to do with economics. And what our economics are has very much to do with our values. Our values revolve around the belief that making money is the most important things we can possibly do. And when that's the most important thing that we can do, then destroying the environment is subordinated to the most important thing that we can do (i.e., making money) and we end up with more hurricanes.

Also, when there's a hurricane in Florida people's lives are not destroyed. They are very severely damaged and many people might lose their lives, but the impact on a state like Florida is very different from the impact on a poor state like Honduras or Venezuela, where a whole economy can be undermined by a natural disaster because there aren't the resources to recover. So it's a way of not facing reality when we blame these kinds of disasters on nature or on forces beyond our control. They are very often very much within our control, we simply choose not to do anything about it.

JW: And with respect to civil strife?

AP: It's my strong view that both in the case of Rwanda and Yugoslavia, the civil and social disintegration rested on what happened first -- economic degradation. Rwanda was an economy wholly dependent on coffee exports. In 1979 President Reagan and Mrs. Thatcher encouraged coffee producers to end the coffee agreement which had guaranteed prices of coffee to some of the poorest countries producing coffee. It had meant that in the richest countries we might have had to pay a little bit more for our coffee, but what we were paying for was stability -- economic stability in those poor countries. In 1979 we voted for cheaper prices of coffee for ourselves, for the consumer, and we voted at the same time for, in my view, social disintegration and economic disintegration in those countries wholly dependent on that single commodity.

Rwanda, for example, was dependent on coffee. When the price of coffee collapsed, the first thing that happened was that the IMF moved into Rwanda and she recommended economic policies which she has since acknowledged did not take into account the impact on that society. Privatizing industries meant sacking people from their jobs, which meant that Hutu employers had to decide whether to save a fellow Hutu's job or the job of a Tutsi. This, then, exacerbated existing tensions. It also led to higher prices for electricity. It led to farmers' pulling up their coffee plantations in despair. It led to a collapse in tax revenues for Rwanda. So the government then could not provide health services and other kinds of services. This led to very rapid economic degradation. What followed was civil degradation and social degradation and disintegration.

In Britain, for example, we are very smug about this and you often hear people say, "Well, of course, those Rwandans, those Ugandans, those Yugoslavs -- you know they are natural fighters. They have this kind of civil war and murderous behavior in their blood, not like us decent, upright folk." Well if Britain's GDP had collapsed at the rate that Rwanda's had done, or Yugoslavia's had done, I'm pretty sure that the Welsh would have been at the throats of the English and the English at the throats of the Scots!

JW: Many people who remember the founding of the World Bank after World War II find it difficult to hear that the World Bank and the IMF are part of the problem.

AP: The World Bank and the IMF are two institutions made up of very well-qualified, assured and in many cases really well-intentioned civil servants. Many of them are absolutely superb at their job. However, these institutions are also used by governments to implement foreign policy objectives. Of this there is no question. President Clinton and Mrs. Albright recently admitted complicity with warlords and tyrants in Africa during the Cold War. They admitted to it and I think that was extremely gracious of them and honorable. But the fact is that we know that the corrupt elite of Zaire was given $12 billion by the IMF, the World Bank and the American government and the British government to purchase Cold War aid. Now that corrupt elite has gone and the poor have been left to pay the debts of that Cold War battle, which we won.

JW: Are the decisions about debt relief also political? The current example is Uganda, Mauritania and Bolivia getting relief ahead of other countries such as Guyana and Nigeria.

AP: Well, the system works very, very unfairly. The American and British governments have argued that as part of the debt cancellation, countries should produce a poverty reduction program. But they have also said that these countries have to fulfill macro- economic criteria -- set by the IMF! Now the case of Guyana is a classic example. Guyana is a very, very poor country. Several months ago she was caught in the grip of a general strike. It was, if you like, an internal shock to her economy. The government wanted to settle the strike at 12 percent, but an independent arbitration panel recommended 31 percent for civil servants who are already very, very low paid. The IMF assured the president of Guyana that this would be acceptable. So on the basis of this agreement from the IMF, he reluctantly settled on a pay settlement of 31 percent a year. That meant that his macro-economic targets of fixing his budget moved into deficit. And he was clear that the IMF would understand that was a very likely thing to happen if they settled on the 31 percent figure on the advice of the IMF. Instead, the IMF said, "Yes, you may have reduced poverty by increasing the living standards of a huge portion of your population, but you've failed on your macro-economic target and your budget deficit is rising; therefore you will have no more debt cancellation."

What we see here are the contradictions between the macro-economic strategy and the poverty-reduction strategy. They're built into the system, and that is unfair. What is also deeply unfair is that all of this was negotiated between the President of a country -- the elected President of a country -- and a civil servant who threatened that President and told him that he was not going to get debt cancellation. And that President cannot go to the board of the IMF and argue his case! He has to rely on the civil servant putting that case for him. That gives that civil servant immense power over the poorest countries.

JW: I understand you are working on alternative processes for debt cancellation?

AP: Yes. We say that the international financial system is profoundly unfair because it is dominated entirely by creditors. In our domestic system, when Macy's goes bust, she is able to go to the law to seek protection from her creditors. When Mozambique goes bust, she doesn't get protection from her creditors. Instead, her creditors move in and take over the shop. We say this is unjust. Creditors act as the interested party, the witness, the plaintiff, the judge and the jury in their own court case for debt cancellation and that undermines all of the rule of law. It's against the very fundamentals of the rule of law that you can't be judge in your own court. So we want a more independent process.

We want an independent body to decide whether or not Mozambique can pay her debts, whether or not the lenders that lent her money made wise decisions and whether they should lose their money or whether they should have some repayments. It need consist of no more than three people: one a person nominated by the debtor, one a person nominated by the creditors and the third person would be one that would be agreed by them both. And those three would act as arbitrators and would decide on how much debt should be canceled and who should make losses and on whom should liabilities be landed.

But the other thing is that the whole process of deciding on debt cancellation through arbitration should be done publicly and transparently with the involvement of local citizens who should be invited to monitor and set conditions to insure that the money released from debt cancellation goes to the poor. Now this already happens in the U.S. It's called Chapter IX of the bankruptcy law code and it's what happened to Orange County. When Orange County went bust, of course she wasn't liquidated, her debts were worked out in a proper and orderly way, so that citizens in Orange County don't suffer for those mistakes. Creditors get some of their money back and the debtor also has to hand over some assets, but it's done in an orderly way. In the international financial system there is no order. The whole thing is governed by creditors. Creditors don't want to cancel debts, which is why they never have and when they do cancel them, they do so in their own favor.

JW: How would you win acceptance of a proposal like that?

AP: Well, we're going around the world trying to persuade everybody that a form of arbitration, a form of insolvency would be a very good thing, because it would introduce discipline into relations between debtors and creditors. Right now if I lend money to a wicked dictator, I need never have fear of losing that money. International financier George Saros has said that lending to sovereign governments is the most profitable business you can do. You never lose! The corrupt dictator might go to pot and might disappear like President Suharto or President Marcos, but in the end the taxpayers in his country will repay the debt. And the same with dictators; they know they never have to repay those debts because those contracts are signed in secret.

JW: Do you think you really will close up shop December 31, 2000?

AP: Well, the campaign comes to an end at the end of December 31, and we either will have succeeded or we will have failed. If we've failed, then we will need to do something different. Next year is not the year of Jubilee. And if we fail, and I hope very much that we won't fail, then we may have to think about a post-Jubilee campaign. Right now, I want to succeed and I want Jubilee 2000 to succeed so we can close up shop at the end of the year knowing that we've canceled the debts of the poorest countries.

For more information about the Jubilee 2000 campaign, including news about activities in the U.S., check <www.jubilee2000uk.org>.