Confessions of an Economic Hit Man

I ordered this provocatively titled book from amazon.ca today after listening to an extended interview with its author, John Perkins. The interview was conducted by Amy Goodman and posted to the Democracy Now! website. Here's a taste:

[My job] was giving loans to other countries, huge loans, much bigger than they could possibly repay. One of the conditions of the loan–let's say a $1 billion to a country like Indonesia or Ecuador–and this country would then have to give ninety percent of that loan back to a U.S. company, or U.S. companies, to build the infrastructure–a Halliburton or a Bechtel. These were big ones. Those companies would then go in and build an electrical system or ports or highways, and these would basically serve just a few of the very wealthiest families in those countries. The poor people in those countries would be stuck ultimately with this amazing debt that they couldn’t possibly repay.

A country today like Ecuador owes over fifty percent of its national budget just to pay down its debt. And it really can’t do it. So, we literally have them over a barrel. So, when we want more oil, we go to Ecuador and say, “Look, you're not able to repay your debts, therefore give our oil companies your Amazon rain forest, which are filled with oil.” And today we're going in and destroying Amazonian rain forests, forcing Ecuador to give them to us because they’ve accumulated all this debt. So we make this big loan, most of it comes back to the United States, the country is left with the debt plus lots of interest, and they basically become our servants, our slaves. It's an empire. There's no two ways about it. It’s a huge empire. It's been extremely successful.

I'm not sure why any of this surprises me anymore. The only thing that should surprise me is that the US could "literally" have Ecuador over a barrel. Perhaps Perkins means a few billion barrels. Of oil. 4.63 billion to be exact. After decades of being seduced by "sex, money, and power," Perkins finally had a crisis of conscience prompting him to publish the book he long contemplated writing. I can't wait to read Confessions, despite the fact that it was written by an economist.

Odious Debts

I heard an essay on CBC radio yesterday read by its author, Patricia Adams. Adams describes the phenomenon of odious debts, a subject she expands at some length in her book posted online. Briefly, the principle of odious debts was first enunciated by Alexander Sack in 1927, a minister in Tsarist Russia and later a legal scholar in Paris:

If a despotic power incurs a debt not for the needs or in the interest of the State, but to strengthen its despotic regime, to repress the population that fights against it, etc., this debt is odious for the population of all the State.

This debt is not an obligation for the nation; it is a regime's debt, a personal debt of the power that has incurred it, consequently it falls with the fall of this power.

Adams' essay yesterday focused on Iraq and the debt relief offered by Western governments, an informal collective known as the Paris Club. She details the specific issue of Iraq's debt in a report published in a CATO Institute's Policy Analysis paper.

US-appointed Iraqi Prime Minister Iyad Allawi negotiated the Paris Club's dubious offer to relieve Iraq of 80% of its debt owed to Western governments in November 2004. The offer came with strings attached, courtesy of the IMF, with 30% of the debt canceled immediately, 30% canceled on implementation of IMF economic programs, and 20% canceled upon the IMF adjudging the programs a success. Iraq's Letter of Intent to the IMF indicates that debt sustainability would only be possible with a 90-95% debt reduction. Moreover, the IMF has been criticized for undermining the authority of local governments and for imposing economic policies which coincide more with Western interests than with the prosperity of local citizens.

The Paris Club agreement would relieve Iraq of US$31.1b of its public debt. However, Iraq owes over US$120b to external creditors, with Saudi Arabia and Kuwait holding most of the remaining debt. It also owes another US$15b to private creditors.

These closed door agreements circumvent an examination of the debt, and of the appropriateness of the Iraqi people footing the bill for Saddam Hussein's mismanagement and opperession. Why should Hussein's victims also be saddled with the obligation to repay his excess? Why should Western governments and financial institutions be allowed to couch their debt relief as generosity to Iraqis when the money was lent to a brutal dictator to prop up his detestable regime?

Iraq's National Assembly rejected the Paris Club agreement in a resolution announced November 22, 2004 and passed unanimously on November 30. The resolution states:

(1) The debt is almost entirely odious.
(2) The Paris Club has no right to impose IMF conditions on Iraq.
(3) Iraq should repudiate the debt but offer creditors the opportunity of a fair legal arbitration to prove if their loans to Saddam were actually beneficial to the Iraqi people.

Iraq's creditors were complicit with Hussein, and if they are not to be repaid, let that be a lesson to would-be creditors of other tyrants. We, the taxpayers of the Western democracies, are footing the bill for supporting Hussein's regime. Debt relief to Iraq represents an abrogation of culpability rather than an act of charity. Let arbitrators--not falsely magnanimous states--decide which debts the Iraqis should repay. And let us hold our nations accountable for morally questionable loans of our capital.

FURTHER READING
In addition to the links in the text above, I also suggest the following:
Odious Debts – Odious Creditors? International Claims on Iraq (erlassjahr.de)
Jubilee Iraq
Iraq's Odious Debt Must be Eliminated, Not Rescheduled (KAIROS)