A tale of two stories| Counter-currents



International Debt Statistics (2022) released by the World Bank revealed that the external debt of 123 low- and middle-income countries grew by an average of 5.6% to $8.7 trillion in 2020. This shows the devastating impact of the pandemic on the economy of the developing country. G20 creditors have designed a policy framework called the Debt Service Suspension Initiative (DSSI) as if creditors are doing charity for the poor living in the developing world. The international debt trap locks people and countries into an economic system where borrowing is normalized to service growing debt burdens. The debt trap eats away at people’s incomes, well-being and livelihoods. Many poor people commit suicide because of the debt trap. Similarly, poor and developing countries sacrifice their economic independence and political sovereignty in making decisions about their own people, resources and territories. Creditors force countries in the debt trap to follow various policies that facilitate the achievement of the goals of developed creditor countries. It is a systematic strategy of developed countries to exploit developing countries. Debt is a tool of control and exploitation. It helps to widen the gap between rich and poor regions, developed regions and underdeveloped regions. The international debt crises and the traps of poverty, underdevelopment and inequality are the products of colonial policies and neo-colonial policies imposed on developing countries by developed countries.

Developed countries have a long tradition of occupying the territory and resources of failing countries. For example, French and Belgian soldiers had occupied the Ruhr; a region of North Rhine-Westphalia, Germany, and access coal when the country failed to repay the debts of Versailles. During the colonial period, the countries of Asia, Africa and America were divided between European colonizers and European colonialism established an international debt trap in these continents. After World War I, the United States Congress refused to cancel European debt. However, after World War II, European countries canceled each other’s debt and came together at the Bretton Woods conference to create an international financial system under the leadership of the United States. This conference led to the rise of the Bretton Woods institutions and institutionalized the international debt trap of post-colonial developing countries.

During the 1990s, the developed countries of the G7 created a free market economy regime driven by neo-colonial economic policies under the guidance of the World Bank and the IMF. These two institutions imposed policies of structural adjustment, liberalization, privatization and globalization on countries that did not repay the debt. These policies were tools of indirect control over the natural resources, domestic consumption, labor and investment markets of failing countries. The international debt trap is the mother of all economic crises in developing countries, which helps maintain the economic and political hegemony of developed countries in Western Europe and the United States.

The international debt trap resurfaces from 2020 after the publication of “The Elements of the Chinese Challengeby the Policy Planning Staff, Office of the Secretary of State, United States. This unclassified document from policy planning staff focuses on China’s “predatory development agenda and debt trap diplomacy.” The document also claims and highlights Beijing’s “authoritarian goals and hegemonic ambitions.” He also argues that “the CCP has undertaken major infrastructure and investment projects, debt-trap diplomacy, and other predatory economic practices in all regions of the world, to better induce or coerce nation states. sovereigns, especially their ruling and business elites, to help and encourage China to reshape the world order. And the CCP has leveraged its integration into international organizations to infuse them with norms and standards rooted in party authoritarianism.” This ideological propaganda is far from the truth. There is no factual basis for such claims. This is part of relentless anti-China propaganda.

The rise of China and its internationalism based on peace and development threaten the very foundation of the debt-driven international financial system led by Western Europe and the United States. China engages with developing countries without setting conditions and helps various countries in Asia and Africa to develop infrastructure to mobilize their own resources for their own economic development, without debt or Western dependence. Such mutually beneficial engagement between developing countries and China threatens the very foundation of Western hegemony. Therefore, China is portrayed as a devil by the so-called western democratic world.

In reality, the Chinese government is deepening its relationship with the African continent by canceling 23 interest-free loans for 17 African countries. The Chinese government also canceled more than $3.4 billion in debt and restructured around $15 billion in debt for African countries between 2000 and 2019. Beijing is also renegotiating another 26 loans while refinancing around $15 billion in debt. in Africa. Therefore, the Chinese debt trap is an ideologically motivated campaign to defame China and its alternative approach to international debt, bilateral, multilateral trade and infrastructure development agenda. Western countries are asking for structural adjustment to diminish the welfare state and its infrastructure while China is providing debt for infrastructure development for the rise of an economically independent state. China is showing its commitment to mutual development in debt and investment as Western countries impose investment conditions that exploit people and their environment in the developing world.

Both of these stories are key to understanding and overcoming debt-driven capitalism and exposing the Western model of the international economic system that destroys democracy for the market, ruins people’s lives and livelihoods for profit, and creates the foundations for environmental disasters. The working poor around the world are victims of such a debt trap created by capitalism under the direction of Western states and governments. It is time to dismantle capitalism and its debt-driven financial architectures for the good of humanity, peace, prosperity and the planet.

Bhabani Shankar Nayak, University of Glasgow, UK


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