Greece like Africa enslaved by debt

Today the International Monetary Fund -IMF-dramatically issued a statement that could have easily been levelled at itself many times in the way it dealt with African and Latin American countries. In the statement it said the bailout deal  European union members forced upon Greece is 'totally unsustainable and will cripple the state and its people for many years.

The Greek Eurozone Crisis is not the first case of a crippling economy to be saddled with debt after debt that keeps it shackled and burdened by a debt it cannot pay back to wealthy nations. 

Rewind to the year 2000 when the ‘Jubilee 2000’ debt forgiveness campaign canvassed the largest ministerial economies in order to cut back on the standards inflicted upon the poorest countries in the world. How had these countries fallen in debt in the first place? And is Greece any different to similar situations in Latin American and African countries?

The back story to the Latin American crisis witnessed countries such Argentina, Brazil and Mexico with a newfound wealth from the oil rich OPEC countries pushing their excess wealth in foreign banks. As a result many countries began to borrow from international creditors in order to fix their interest rates. The Brazilian and Argentine dictatorial leaders were floating in free money with little cost to them, but the bubble was about to burst.

These Latin American countries were furiously borrowing solely in order to pay back their debt. Their plight was made worse by rising oil prices, thus finding themselves in an unsustainable fiscal position, similar to Greece.

A continent away in Africa witnessed drought, wars and extreme poverty. For decades the continent scraped through a series of failed economic policies which created detrimental levels of production and government services. Africa is almost entirely dependent on its agriculture sector, which was subject to the oil price surge for exporting goods.

Both Latin America and Africa became too burdened with foreign debt with a low market scheme and were all on the brink of economic and political turmoil. To the ‘rescue’ came the global fiscal bodies and leading economic nations, such as the International Monetary Fund (IMF), USA and Europe.

Decades later they were highly critiqued during the Jubilee 2000 campaign because the ‘assistance’ they offered to Latin American and African nations ended up putting them in a worse position.

The ‘Washington Consensus’ was drafted as the guidebook for poor economies to bolster up and prosper, and on the G8’s free market terms. These countries were provided funds to purchase foreign goods, were instructed to change their industries to a comparative advantage that provided cheap goods for their new traders, became members of the free trade agreement, installed austerity measures and privatised several of their industries. These had varying achievements, and were harmful when unsuccessful.

In Bolivia the privatised water company allocated their funds to wealthier neighbourhoods and some cities were completely cut off of water when unable to pay exorbitant prices. These countries were provided funds by the wealthier nations in order to purchase their own goods, and only their goods, and changed their industries in order to better fit the markets needed by the wealthier countries as well.

A major critique of the free market is that it is celebrated as a benefit for poorer nations when it often does the opposite. A rigid approach to free trade and comparative advantage production leaves these poorer countries to produce non-industrial goods and volatile priced products in order to create appeal. Selling a car and selling bushels of apples clearly produces a different profit. Latin America and Africa did exactly what they were instructed to do, and they saw their creditors get wealthier and their debts grow bigger. The parallels with Greece is phenomenal, a country which had been forced to shadow the same steps as the Latin American and African countries.

The aid from these economic powerhouses is well intended, but they virtually took over the developing countries and saddle them with debt and restrictions that could keep them down for decades. The Greek crisis and bailouts have world leaders and institutions in frenzy. 17 hour marathon negotiations, elections, and a worldwide audience have put Greece and Europe on the spotlight. In the end even a anti-austerity Greek Government like African and Latin American Government before was forced to accept another bailout, at an intolerable cost of saddling the nation with unsustainable debt, and a living standard that will keep many poor, perhaps for decades.

For a brief time Greece joined the Northern hemisphere of wealthy nations club, but a once prosperous nation couldn’t play the same game, much less compete with the economically powerful countries. As a result they are now treated with the same disdaine many African countries are subject to, furthermore they are totally dependent upon that support.

Sadly though that level of support offers short/medium term survival, but with little dignity. And for how long, who knows?

Alexandra Fox