While those in control of the commanding heights of the global economy would like to convince us that globalisation is a new phenomenon made inevitable by qualitative development of productive forces, we know better. Africa and the rest of the third world have been integrated into the global economic system since the mid 15^th century and no sooner did they encounter the forces of globalization than they were immediately integrated therein. Those who tried to resist the globalisation juggernaut, like the American Indians, were exterminated.

Unwillingly, Africa was part of the then dominant international trading system where its role in the then international division of labour was to supply natural resources in form of gold, ivory, cloves and human resources in form of slaves to the “developed” world.

The second wave of globalization was the physical establishment by the North, where in 1884 at Berlin Conference, the “scramble for Africa” was concluded with partitioning of the continent into arbitrary units among the leading colonial powers. The division of labour then assigned Africa the role of producing primary commodities (agricultural products, minerals, wildlife resources) to processing and manufacturing interests in the so-called “mother countries.” Asia and Latin America received  similar treatment. As Eduardo Galeano says, after the discovery of silver mines of Potosi, in what is now Bolivia, and of Zacatecas and Guanajuato in Mexico, the silver rush eclipsed the gold rush that was predominant in that region and in the mid 17th century, silver constituted 99 per cent of mineral exports from Latin America. Based on data from the Casa de Contratacion in Seville, 185,000 kilograms of gold and 16 million kilograms of silver arrived at the Spanish port of Sanlucar de Barrameda between 1503 and 1660. Silver shipped to Spain in little more than a century and a half exceeded three times the total European reserves.

Almost half a century after the formal defeat of colonialism, the division of labour still persists and  has been revised and reinforced through several avenues, debt servicing being one of them.

Debt servicing

Figures from the World Bank indicate that at the end of 2002, the external debts of the third World soviet bloc stood at US$ 2,400 billion – a four-fold increase from US$ 580 billion in 1980. Below is a breakdown:

Source: World Bank, GDF 2003

During the same period (1980-2002), developing countries repaid their creditors a little over US$ 4,600 billion. Thus, the countries of the Third World repaid 8 times what they owed but still found themselves 4 times indebted! As Eric Toussaint says, this amounts to countries of the Third World sending an equivalent of 50 Marshall Plans to creditors in the North (with the capitalists and governments of the South skimming their commissions on the way).

This usurious system is aided by the transfer mechanism set up and supervised by the Bretton Woods Twins with the help of the Paris Club and abetted by the ruling elite in the impoverished countries. The ruling classes in these countries take advantage of the external indebtedness of their own to make quick bucks by exporting the capital they accumulated through various means including embezzlement of part of the loan money, exploitation of wage earners and small producers, looting of their national treasuries, revenue from the extraction of primary commodities and other revenues paid by the TNCs that exploit the country’s resources and proceeds from criminal activities such as drug trafficking and arms smuggling. 

The aim is to stash these funds in safe havens as they are not guaranteed of peace to enjoy them once they are out of power. Once this capital is out of their respective countries, they are conferred with legal status which they did not have in the first place. This contributes to the accumulation of capital in industrialized countries.

Leads revel that part of this money is then reintroduced to impoverished countries, making the ruling elite in the Third World creditors of part of their countries’ external debt. On most occasions, they in turn borrow the same money from the banks and financial markets of industrial countries in their own capacities as business people.

The political elite in underdeveloped countries borrow from industrial countries’ money markets at interest rates that are higher than the ones charged for residents of industrialized countries but lower than those imposed in their own countries by central banks, thanks to agreements with the IMF and the World Bank and lend it to their governments – through such instruments as treasury bills and bonds – as well as to small and medium businesses in their countries. The cycle is, no doubt, vicious.

The ruling elite of African Country X deposit US$ 400 million in bank Y in the North at a specially negotiated interest rate of 5% (after a year they pocket US$ 20 million in interest) and borrow US$ 200 million from this same Bank Y at 12% interest (they pay US$ 24 million, so they have transferred US$ 4 million to the profit of Bank Y). The same ruling elite lend the US$ 200 million to Central Bank Z (their own government’s treasury bills) at an interest rate of 20% (when they make US$ 40 million at the end of the year, they take off US$ 20 million to repay Bank Y and pocket US$ 20 million). Y (Banks in the North) therefore make more profit than X (leaders and capitalists of Africa) who in turn make more profit than Z (a government, wage-earners, small and medium businesses, peasants in Africa).

The foregoing explains why the ruling African elite are not enthusiasts of the demands for debt cancellation or repudiation – not even fundamental renegotiation of internal and external debts in their respective countries.

In the backdrop of all this, it is scandalizing to say the least, to hear the mandarins at the World Bank and the IMF, eminent professors of economics and even our own bureaucrats at the national treasuries declaring on the rooftops that local savings that would spur capital formation is insufficient, obliging countries of the South to resort to contracting more external loans to address this inadequacy. The real need is to prevent capital from leaking out and to design a resource distribution system that would enable and encourage people to build up local savings that could be employed in socially just and ecologically sound development.

This system of externalization of the resources of underdeveloped countries has been a tightly kept secret. Apart from Miterrand’s declaration 15 years ago, it is only in April 2003 that the World Bank lifted the tip of the veil. In a press release announcing the Global Development Finance (GDF) report, the Bank declared that “developing countries overall have become net capital exporters to the world running a ‘modest’ current account surplus in most years since 1998.