ARCHIVE WORLD DEBT – A NEOCOLONIAL SYNDROME
T.G. Jacob
Debt Crisis
The international financial system is certainly facing a very serious crisis. The four decades following the Bretton Woods agreements (1944) saw a series of crises, but none of them had ever assumed the severity that has come into being in the first half of ‘80s. Relatively minor crises like the oil price increase no doubt precipitated further imbalances and distortions in the imperialist economic system, but the imperialist planners and strategists were able to float over such crises and even derive temporary advantages out of them. Today the situation is no longer like that. The spectre of international debt has assumed such proportions that even the most naive apologist of imperialist capital is unable to gloss over the grave nature of the crisis.
The international banking system was never on such a hot plate after Bretton Woods. And the most dominant aspect of the present situation is the $80,000 crore debt that countries of the third world (both oil and non oil economies) ‘owe’ to the imperialist commercial banks and international financial agencies. It is not just the hugeness of the amount that matters, but the more important question of repayment and servicing of this debt. Not all countries of the third world who are debtors are on a standard scale. Many of them (e.g. Brazil, Mexico, Argentina, Chile, Venezuela, Nigeria, Peru, Philippines etc.) have reached a position of near bankruptcy while many others are nearing bankruptcy. Still others, like India, are gaining momentum towards the same position. When Turkey became bankrupt in 1978 it was considered as a freak case. But when it came to Latin America it had to be recognised as a real crisis. Now it has spread to Africa and Asia also. It is not just the countries under western imperialist economic domination that are affected – countries in the Soviet social imperialist political orbit like Poland and Hungary are also in the same boat.
An international economic crisis of such magnitude will doubtlessly not go without inviting serious attention from policy strategists and other analysts. Currently, the top brains of the imperialist economic order are feverishly trying to devise ways and means to resolve the crisis to the best advantage of their employers. Neither the solutions of Keynes nor the later developed monetarist theories are found very useful in salvaging the present situation. In fact, the application of many of these theories in the past couple of decades to resolve the then existing crises proved counter-productive in the sense that while providing temporary advantages it has resulted in only further exacerbating the problems of realization for imperialist production and accumulation. We can no doubt expect changes in the imperialist strategy. The intense debates coming out through imperialist mouthpieces on the efficiency of the earlier tools show this. Also we know from the level of the ongoing debates that the imperialists are not decided on what exactly the new strategy should be.
More important are the analyses coming out from those who stand for the destruction of the imperialist system. The accepted Marxist theory of imperialism rooted in the fundamental contradiction of capitalism – between socialized production and private appropriation – occupies the prime position in the interpretation of the current international financial crisis also. According to it the inherent problem of realization drives imperialist productive capital and finance capital to areas where higher rates of profits are possible. So, by implication, the present crisis shows the limits of this process and the imperialists have reached a point where a restructuring is necessitated. Going according to the analysis by Lenin, when the imperialists find themselves at such a dead end in the contest of intense inter-imperialist rivalry they will attempt to break out of it by going in for a major war for redividing the world and further consolidate their need for more and more markets. According to some the present crisis shows only this situation and the world is on the threshold of a world war. The redivision that was achieved through the Second World War no longer meets the current needs and hence the imminent possibility of the outbreak of a third one.
The crisis of overproduction, first that of commodities and then of capital, is no doubt inherent in the dynamism of the capitalist and imperialist system(s). And as such the present international financial crisis can be logically explained through arriving at derivates of this overproduction crisis, of mainly capital. But the question is whether those who are striving for the destruction of imperialism in its present phase can content themselves with such a general and simplified analysis of the imperialist crisis. Or is a more concrete analysis an important necessity for formulating a programme for revolution? The present author feels that it is necessary to analyse concretely than take refuge in “easy to arrive” formulations. What we are trying here is not to provide a comprehensive picture but only to pose the main aspects of the questions involved in a sharper and more concrete fashion.
Development of the ‘Debt Crisis’
The most obvious characteristic of the presently raging debt crisis is its historical setting. Following the lead of Mexico a series of countries blew the lid in quick succession during the period 1982-84. This by no means connotes that the crisis came as a surprise or that it was a sudden development. Actually the crisis was maturing into an explosive situation all through the 1960s and ‘70s. And it is organically linked up with not just the crisis of overproduction of capital in the imperialist economies but also in the very nature of the pattern of economic development that occurred (and still continuing to occur) in the countries of the third world after WW-II. It is also very important to note that the crisis has erupted only when the debtor countries reached a position of bankruptcy, i.e., exposed themselves as being incapable of repaying the principal or servicing the debts taken. In other words, the crisis erupted only when the imperialist production relations—that is to say, the economic relation between the imperialist countries and oppressed countries—were called into question due to the pressures operating on the dominated economies.
A complex interpenetration of economic and political factors operated to make the governments and classes dominating the governments in the countries that received formal independence after WW-II to adopt the particular strategy of economic development which they actually adopted. Simultaneously, and in the same manner, both political and economic factors prevailed upon the imperialist capitals and governments to adopt a qualitatively different strategy of penetration and control. What we mean here is that if the present crisis is taken only as the logical culmination of the ever present economic crisis of capitalist/imperialist economies then it can very easily lead to economic reductionism and wrong conclusions.
The international political context, which prompted the imperialists to adopt a qualitatively different strategy in the post-WW II period, was the impossibility of continuing with direct control and plunder of third world countries and their resources. At the same time, the superprofits amassed through direct imperialist plunder had helped in no small degree to create the material base for overproduction of capital. In general terms we can say that attempts of the imperialists to resolve the realization problem with regard to commodities led to the new problem of overproduction of capital, i.e., the realization problem got confounded. At the least the principal aspect of the realization problem shifted from commodity surplus to capital surplus.
In the large number of third world countries where the national liberation struggles had not resulted in any decisive break with imperialism the immense possibilities of exploiting the market for both commodities and capital was seen by the imperialists. Within these countries the existence of backward relations of production resulting in chronic stagnation of the forces of production was functioning as the overall constraint and due to the fact that the liberation movements were not developed to their natural climax, the ruling classes were unable to unleash the internal productive potential. To unleash this potential, a break with imperialism (and feudalism) was necessary, and the ruling classes were neither capable nor willing to do it. At the same time they wanted to further enhance their economic power and for this looked towards imperialist ‘aid,’ loan etc. This was the situation when the imperialist economies themselves were looking for a way out for alleviating the problem of capital overproduction. As an ideological basis of their strategy, numerous theories recommending export-import based growth for third world countries were widely propagated.
These apologies for imperialism differed in finer details but were in agreement on vital points. The common point was that in order to generate a self-sustaining growth of the newly independent countries there should be initial dependence on the advanced economies and this can be done through exporting whatever can be advantageously produced in exchange for scarce capital to purchase capital goods and technology. After such an initial period the rosy phase will come when the dependent country will be able to ‘take off’ on its own technological and capital base generated with the cooperation of advanced countries. The strategy of economic development adopted by the countries of the third world in general conformed to these apologies for imperialism. And the present debt crisis owes a lot to this pattern of economic development.
The technological and capital dependence which formed the basis for the development strategy has resulted not in any self-sustaining growth of the victims but in its exact opposite. Large-scale import of capital and technology (in addition to massive imports of commodities) very soon turned the terms of trade against the third world countries. Not only that, the unequal nature of trade (as explained by the dependency theorists) acted as a severe and ever increasing drain on these economies. Recurring balance of payments crises could be temporarily alleviated through massive loans and ‘aid.’ But in actuality this was only postponing the crisis through allowing it to mature into demonic proportions. Imperialist finance capital agencies were only too happy to advance loans because such a policy immensely benefited the short-term profit motives of imperialist capital besides being in conformity with the long-term political calculations involved.
The nature of the ruling classes plays a dominant role in facilitating such a pattern of imperialist penetration and plunder. As we can see now the ruling classes in many countries (especially obvious in the case of those countries that are already well known as bankrupt) did not even bother to channelize the capital inflow into productive areas, however distorted such productive capital investment is in reality. They simply diverted the funds to bank accounts in the imperialist finance centres which enabled the banks to advance further loans. In the case of the oil countries this is particularly conspicuous. A recent study (“Defuse the Debt Bomb?” by Andre Gunder Frank in EPW, July 7, 1984) quoted the estimate of Manley, ex-prime minister of Jamaica, which states that 70% of the loans received by eight major third world countries were converted into capital flight as the members of the ruling elite in these countries put their money in Swiss Banks or purchased real estate in the imperialist countries. Another significant part of the money is put into unproductive purposes in the receiving countries themselves. Plain and simple corruption plays a serious role in this scheme.
As if the all-pervasive corruption is not enough, there are many other methods also to trap the national economies of the receiving countries. Take, for example, countries like the Philippines, Argentina or Peru. In these countries astronomical amounts of resources are utilized to suppress the democratic and revolutionary movements directed at the fascist ruling classes. Of course, maintenance of these fascist dictatorships was necessary for the continuation of imperialist exploitation and plunder because the masses are rebelling for overthrowing not only the local fascists but also their imperialist masters. Here the political and economic interests of the imperialists become indistinguishable. Thus we see that the very nature of the pattern of economic development adopted by the ruling classes of the third world countries, unequal trade relationships, all-pervasive corruption and luxury consumption, brutal suppression of the people’s movements, speculation and fraud – all have played important roles in generating the present debt crisis.
What is being shown as clear as daylight by the present debt crisis is that the present relationship between imperialism and third world countries is no longer convenient. On the one hand, the third world countries are not in a position to repay the debts and on the other the imperialist capitals are not in a position to generate the infinite amounts of credit that will be required to continue with the present system. The top commercial banks in the US are already overexposed to a fantastic degree and any serious disrespect shown by the debtor countries can trigger off a chain of bank bankruptcies which will directly influence the productive investment sector. In other words, the possible collapse of the international banking system as a result of the non-payment of interest and principal by the debtor countries could start a recession in the imperialist economies, which will further snowball into an all-round economic crisis through the multiplier effect. But is it really necessary that such a course will inevitably follow?
Firstly, let us see whether the third world countries, which are in arrears, can precipitate such an imperialist crisis, under the given conditions. Here we mean the third world governments. When Argentina under the new Alfonsian government showed unwillingness to toe the line of the IMF, US government and a few debtor countries intervened and temporarily bailed out Argentina and its creditors. But the overall result of the recent high level meeting of the 11 main debtor countries of Latin America held in Colombia was that no serious threat (like the formation of a debtors’ cartel and declare a moratorium on interest payments) is envisaged by any of the participating countries. The Argentine case was an exception because of the peculiar conditions in which the new government there is involved. In general, we can see that none of the governments in the main debtor countries is that way economically independent and hence able to arrive at and implement any decision which goes against the interests of imperialist capital. At the same time, the conditions imposed by IMF (especially those imposed when the countries face rescheduling difficulties and approach IMF for help) are thoroughly regressive in nature and are bound to spark of instant instability and chaos in the internal situation. Already the phrase ‘IMF riot’ has become a well established euphemism.
During the last few years the internal economic fronts of the Latin American countries (as well as of the other neo-colonies) have registered further deterioration. Per capita income and domestic production declined sharply. Unemployment and near starvation or starvation conditions have engulfed millions in each of the debtor countries, whether in Africa, Latin America or Asia. This situation of steadily deteriorating standard of living of the masses in the debtor countries can only increase as more and more belt tightening measures are executed by the reactionary juntas at the insistence of the IMF and other international financial policemen. This means that the situation of instability and rebellion is bound to accelerate. And the present rulers of the neo-colonies have proved time and again their utter incompetence to serve the national interests. Under this situation the only way out is the smashing of these reactionaries an effecting a decisive break with imperialism. Then, of course, there is no question of any repayment of debt. On the other hand, the imperialist assets that are within the neo-colonies will be expropriated. Then the spectre of financial collapse and the all-round depression in the imperialist economies will become a reality in action.
Internal Crisis of Imperialism as the Determining Factor
In the case of the present debt crisis we have seen that only when the oppressed countries were exposed as incapable of repaying did the crisis come out into the open. Up to that time receiving and giving loans was merrily going on.
Overproduction of capital which necessitated pumping in of enormous quantities of money into the countries of the third world through bank loans, as we said earlier, was meant to salvage the imperialist economies. But now, with the emergence of the debt crisis, the limits are clearly shown. So also the mechanics of how the means to solve a problem turns into its opposite and becomes an even more formidable contradiction. Of course, many immediate factors have contributed towards the exposure of the debt crisis at this juncture. Among them the two oil price increases (in 1973 and ’78) are pointed out as important reasons. Another important reason that is pointed out is the steadily rising interest rate which is mostly a result of heavy deficit financing resorted to by the imperialist governments, particularly the US government. In other words, the enormous deficits (running into a couple of hundreds of billion dollars) are possible only through the continuous extraction or an increasing surplus (through an automatic increase in the rate of interest) from the neo-colonies.
Along with these two reasons another reason pointed out is the fall in commodity prices, which has turned the terms of trade against the neo-colonies. When the real rate of interest rises, the debt service burden increases and precisely at this juncture if the prices of exports fall the problem gets multiplied. When we look at the dynamics of the debt crisis it can be seen that a similar process has set in motion the chain of events leading to the present situation.
But these short-term reasons do not explain the essential structural nature of the crisis. Of course, these short-term reasons are the subjects of serious analysis by imperialist brains, who are trying to find out ways and means to salvage the situation. Already they have started airing changes like reduction in interest rates, conversion of existing debts into relatively long-term bonds etc. but what the experience of the development of debt crisis shows is that cosmetic changes in imperialist policies are only bound to become part of the existing problem or even develop into bigger and newer problems under the given overall framework of imperialism and oppressed countries. This is where the overproduction theory taken by itself fails to provide a correct and sufficient picture of the problem.
Overproduction is an obvious truth concerning imperialist and capitalist economies. But it is very important to correctly understand the specificities of the current nature of imperialism; and without arriving at such an understanding, resorting to the overproduction theory to explain phenomena which did not exist earlier will only lead to oversimplifications. Understanding debt crisis is an important such instance. As we mentioned earlier, international debt became a real, live problem for the imperialist system only when the debtor countries of the third world could not stand it any longer. Imperialist production relations, as the economic and political relations between dominated and dominant countries, have assumed their own specific features during the present phase of imperialism. Any rupture, whether actual or potential, in the contemporary imperialist production relations, understood only in terms of general truths discovered during the phase of ‘pure’ capitalism and its initial stage of development into monopoly organisation and imperialism will be only partially explaining the objective reality.
Under the imperialist strategy of ‘develop and control’, limits are set on the development of productive forces and hence on the development of a class of bourgeoisie with its own independent realm of operation. At the same time, the forces of production are developed to a certain extent and likewise the market. And the constraints on further development are operative in the very nature of the process of development. What this shows is a basic difference between the period of direct colonialism and neo-colonialism, though the problem of overproduction of commodities and capital remains during both the periods. Rather, the problem of overproduction and realization has assumed more complex and serious proportions during the course of transformation into neo-colonialism. But what is important here is that the crisis of the imperialist system has led to qualitatively new developments in the neo-colonies though the causative factor which compelled imperialists to resort to such a method remained the same on an abstract level.
As an illustrative example we can take the ‘green revolution.’ This programme came into India (as in the case of other neo-colonies) in the form of a package deal and has given rise to a new class of capitalist agriculturists while acting as an outlet for imperialist financial and productive capital. Here the strategy was clearly one of developing the market and productive forces for enhancing exploitation. But now what we find is that the very same new class of agrarian capitalists finds its way ahead extremely difficult and the production boom is exposed as not being able to sustain itself. The shrinkage in the amount of investible surplus because of the unequal terms of trade between agricultural inputs and outputs is preventing the development of this class to any further levels. So there is stagnation. And there is every chance that these new class forces may join the ranks of the anti-imperialist sections because of the strong objective contradiction existing. In other words the strategy of ‘develop and control’ has given rise to a new set of contradictions threatening the imperialist production relation.
Or take, for example, the pattern of industrialisation and the new contradictions that it has brought about. Initial dependency for capital goods and know how has developed into deepened dependency involving almost every aspect of production and marketing, and the rise of local monopolies effectively hindering the development of industries in any even manner. It is interesting to note that the local monopolies remain monopolies only because of their close tie up with imperialist financial and industrial agencies and the local government is no exception. That is, the state capitalist sector also possesses a monopoly character because of its dependency on imperialist agencies and governments. This has created a highly lopsided industrial structure while at the same time multiplying the capital and technological base of the economy. At the same time, the industrial development of this type has generated a contradiction between the petty capitalists and monopoly capitalists. What is important here is that the imperialist sponsored economic development in a neo-colony like India has changed the class relations and produced new class contradictions. In other words, the objective basis for New Democratic Revolution has got strengthened though this was certainly not the objective of the imperialists. And it is the sum total of these internal contradictions that is propelling the new political developments in these countries, though the role of imperialism as an active catalyst is beyond doubt. The very same laws of economic dynamics which the imperialists created or helped to create have led to serious threats to the imperialist production relations themselves. And in turn these threats to imperialist production relations are bound to seriously affect the internal economic dynamics of the imperialist economies themselves. The possible impact of non-payment of debts on the imperialist finance capital system is an indicator.
Coming back to the international debt crisis, it is important to note that it is not only the ‘market’ economies of the third world that are affected by it but also countries belonging to the Soviet orbit. Hungary and Poland are two of the more remarkable examples and they show the interpenetration of imperialist and social imperialist interests. In Poland’s case we can see that each time the people of Poland rise up against the Soviet backed dictatorship the debt position also increases because more and more flow of imperialist capital is necessary to pacify the people and thus maintain the present ruling system. Of course, this apparent paradox can be wished away by stating that once world war breaks out these debts which the pro-Soviet countries owe to western bankers will automatically be arbitrarily cancelled. In other words, if we go according to this line of argument, the Soviets are willingly allowing the countries in their orbit to liberally draw from western imperialist banks with the ulterior motive that in any case a world war is about to occur and it is best to make the maximum advantage of the pre-war period.
But as is obvious from the Polish experience it is easy to see that no such deliberate conspiracy is involved. On the other hand, it is the pressing need for resources faced by the dictatorships (a manifestation of economic mismanagement) that is offering golden opportunities to the western imperialist bankers to penetrate their economies and convert them into debt economies. In this context, the resource limitations of the Soviet Union itself play no insignificant role. To some extent, Soviet Union is also crucially dependent on Western technology (e.g. the oil pipeline question) in many respects. Also the Soviet Union is dependent for many necessitates of life (e.g. food grains). Though not fully studied, it looks quite plausible that the Soviet Union is ‘allowing’ countries like Poland and Hungary to become debtor countries due to its own helplessness as far as mobilization of resources is concerned. This is not to say that there is no inter-imperialist contradiction.
Ever since the monopoly stage of capitalism has set in, inter-imperialist contradiction has come to play an important role in international politics and economics. For that matter, the contradiction is not limited to the one between Soviet Union and USA or even between the two blocs represented by them. There is contradiction between France and USA, Germany and USA etc. etc. There is contradiction even between members of EEC. At any particular points in history, old alliances may be broken and new ones manipulated. The competition between monopolies acts as the basis for this inter-imperialist contention.
The question of countries under the domination of the Soviet Union becoming debtors to western bankers is not a skin-deep one. It has very direct structural implications also. The example of Hungary is interesting in this context. With the increasing penetration by western imperialists, certain other changes are also taking place. The exclusive control by the bureaucrat bourgeoisie is no longer applicable in the same old form. Though under its overall control, the explicitly private sector is gaining ascendancy. In Hungary more than 35% of the foreign exchange is now earned by ‘pure’ private enterprises and many sectors like agriculture and animal husbandry are now predominantly in private hands in the formal sense also. The trend in Hungary as well as in many other countries points at this process gaining further momentum. Thus we can see that loaning money from international bankers involves many other things apart from a simple debt; it also involves abandoning the ‘socialist’ image of production. Of course, why these countries had to go for loans is mainly decided by decisive and deep structural factors.
To sum up, the present debt crisis that has got the potential characteristic of plunging the imperialist economic and political system into a deep crisis is a result of the interaction between the crisis of imperialist economies with neo-colonial economies and the actual threat posed by it is the possible rupture in the global system of imperialist production relations. At the same time the nature of ruling classes in the neo-colonies makes any such rupture a near impossibility under the given conditions. The real spectre raised by the debt crisis is the overthrow of reactionary pro-imperialist governments and ruling classes in the neo-colonies, which will mark a radical break with imperialism. Only such a break can effectively intervene in intensifying the crisis of imperialism. The debt crisis that has come out in the open now shows the impossibility of the smooth continuation of the present international economic arrangement but does not necessarily mean that an immediate chaos is going to be the result. Cosmetic changes are very much possible, but as is shown by the development of the debt crisis these changes will only lead to further and further intensification of the specific crisis, i.e., the crisis threatening the chain of imperialist production relations.
(Mass Line, October 1984)