The “Tag word cloud” is a marvelous tool for understanding quickly the main gist of a long article. By setting out which words are most commonly found in a document one can readily determine a feel for what the authors are attempting to achieve, and the G8 have never been shy to put into 11,000 words what could not be put into a few hundred. A quick glance at the key words appearing in the statement from the G8 Deauville summit reveals a wonderful array of positivity. Development, cooperation, innovation, growth, support, respect, sustainable (all figuring highly). All so enthusiastic and uplifting, as one would expect from the dominant economic powers of the world. The opening preamble summarises well the objectives of the G8 in the new Middle East:
“we renewed our commitment to support democratic reform around the world and to respond to the aspirations for freedom, including freedom of religion, and empowerment, particularly for women and youth. Democracy lays the best path to peace, stability, prosperity, shared growth and development.” G8 Summit of Deauville – May 26-27, 2011
The summit was notable for promises made to Egypt and Tunisia for development funding. This included $3 billion for a “relaunch” of Egypt’s economy from the IMF. President Barack Obama promised $1bn in loan guarantees and $1bn of debt cancellation for Egypt. French President Sarkozy also said the G8 will provide up to $10bn in direct aid to both Egypt and Tunisia. However, before anyone gets too excited about these “Bankers” bearing gifts, we need to consider a little the history of the IMF, and the nature of what these loans mean.
The IMF and its cousin the World Bank were both founded at Bretton Woods in 1944 with the objectives of providing capital loans for developing countries (WB) and to advise and assist in balance of payments difficulties and exchange rate imbalances (IMF). Since their inception the US and UK have been the dominant parties – indeed the US has provided every World Bank president since its inception. The most controversial aspect of these organizations has been the stringent conditions (or conditionalities) which the loanee country is subjected to as part of the loan agreements. The G8 powers and their IMF/WB proxies have never been shy in setting the agenda. British economist Michael Rowbotham in his book “The Grip of Death” set out several of the most common conditionalities demanded: Currency depreciation, privatisation of key assets, liberalising financial markets, the removal of subsidies to key goods, and user fees (such as in Hospitals), have all characterised the punishments imposed on the weaker nations by the IMF. Perhaps the most contentious aspect of IMF strategy has been the imperative to balance budgets and an effective enforcement of the move to cash crops (for repayment of loans) rather than traditional agriculture which enables food self sufficiency. Accordingly results have meant increasing dependence on US agriculture for basic foodstuffs (Egypt is no longer even self sufficient in wheat) and a worsening level of indebtedness.
Sheikh Ata’ bin Khalil Abu Al-Rashtah the leader of the Islamic political party Hizb ut-Tahrir in his book: “Economic Crises: Their reality and solutions from the viewpoint of Islam” highlighted how “the IMF’s and WB’s policy have not achieved the expected success. Rather, the economic recovery has not been seen in the indebted countries. Instead their indebtedness has increased and become larger than the capacity of these countries to solve it in accordance with IMF recommendations”. Indebtedness has constantly increased and little signs of economic growth or development off the back of loans is apparent. Since the last major IMF provision of funds to Egypt in 1991, which was accompanied by a strict “structural adjustment programme”, the percentage of the population living below $2 a day has doubled. Over the past decade, when GDP growth rates were at their highest, levels of absolute poverty have continued to climb and are now at 20%. The US loan guarantees of $1 billion and forgiving of a further billion rings rather hollow in light of the $35 billion of debt currently outstanding on Egypt’s books.
Noting that “reforms were as important as money,” World Bank President Robert Zoellick explicitly linked the initial $1 Billion “to governance and openness reforms with a further $1 Billion available next year dependant on progress”. Obama’s pledge of $1 Billion was via the US Overseas Private Investment Corporation (OPIC) whose mandate is to support US investment in emerging markets, providing loans or loan guarantees for projects with a high US business involvement. This is usually via Public Private Partnerships (PPP) which is shorthand for privatising (the direct sell off) of key public assets or enabling private companies under government mandate to run key public services (hospitals, schools, power generation, highways). An OPIC press release in late May stresses that the US $1 Billion promise would be used: “to identify Egyptian government owned enterprises investing in public-private partnerships in order to promote growth in mutually agreed-upon sectors of the Egyptian economy”.
On 21 May, EBRD shareholders agreed to lend up to $3.5 Billion to the Middle East, with Egypt the first country earmarked for receipt of loans in the first half of 2012. This will be the first time since its establishment that the EBRD has lent to the Middle East. The EBRD (European Bank for Reconstruction and Development) was established at the time of the fall of the Soviet Union with the explicit aim of promoting democracy and the market economy.
Anyone who has any illusions about the goals of the EBRD’s investment in Egypt would do well to read carefully the EBRD 2010 Transition Report which highlights progress against EBRD objectives. These indicators are highly revealing: (1) Private sector share of GDP; (2) Large-scale privatisation; (3) Small-scale privatisation; (4) Governance and enterprise restructuring; (5) Price liberalisation; (6) Trade and foreign exchange system; (7) Competition policy; (8) Banking reform and interest rate liberalisation; (9) Securities markets and non-bank financial institutions; (10) Overall infrastructure reform. Only countries that score well on these indicators are eligible for EBRD loans. A research institute that tracks the activity of the EBRD, Bank Watch, noted in 2008 that a country cannot achieve top marks in the EBRD assessment without the implementation of PPPs in the water and road sectors.
One can rest assured that the development trumpeted by the G8 will be fully in accordance with its “free market” and western control interests. Sell off of lucrative public assets will become the norm, a full scale capitalist financial system established, and debt enslavement will continue. The unjust loans entered into by the Mubarak and Ben Ali regimes remain, and despite uncertainty over the ultimate destination of these loans will remain over the neck of the Egyptian and Tunisian people. In the rarefied air of the World Bank and IMF corridors the Arab Spring offers a grand opportunity to formalise a relationship with the peoples that dictators could not – no matter how compliant they were. Under the shade of democracy all agreements will vest perpetually with the Egyptian people.
Which brings us to the important question of how the G8 countries can be so bold as to start these new programmes of loans, commitments, and so on, when the revolutions are hardly complete and elections yet to be decided. The dust has not yet settled in Tahrir square with the full voice of the people yet to be heard! The answer of course is that the US and its G8 partners are supremely comfortable with the direction of the uprising in Egypt and Tunisia, and confident that they will maneuver the new regimes along the path of the previous regimes. In short they are comfortable that the change will herald no real change other than lend public electoral approval to all that the new regime does.
It is surely a matter for the peoples of the region to have their own needs and aspirations met before the requirements of the global bankers, whose track record of failed projects in the region is appalling. Before any consideration of loans, “assistance” and major structural change such as the brutal hammer of privatising public assets – there must be a very public accounting of what has gone before. Existing debts must be carefully traced, their source and application including “capital flight” (theft of wealth by government officials) determined, and where appropriate accountability for these debts passed to those responsible for them (and not to the masses). As for political/economic reform, to give just one example, Islam (the political aspiration of 95% of the peoples of the area) forbids categorically the sell-off of public assets to private or multi-national companies.
It is also truly ironic in this time of great global uncertainty when the US as the leading superpower is suffering with the largest deficit on record ($14.9 Trillion) and whose economy has failed to come out of the doldrums of recession – that the US is unwilling to countenance in any way the sort of recommendations that its proxies the IMF and WB are willing to enforce globally (balance the budget, sell off public assets to foreign investors, implement harsh austerity and tax changes).
In conclusion, I looked hard within the G8 declaration for the words “debt forgiveness”, “unconditional” and “no strings attached” – but alas they weren’t there. Neither did the tag word cloud give us “financial exploitation”, “status quo” or “manipulation” – but I think we all realize that they are really there, and in bold.
Jamal Harwood is a regular contributor to New Civilisation. He is a lecturer in Finance, and a member of the UK Executive Committee of Hizb ut-Tahrir Britain