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Abeja Dispatch

You Reap What you Sow

Since we've been in Zimbabwe, the prices of goods and services including phone and electricity have doubled or even tripled! The economy of this country appears to be having serious trouble. In the past, I never paid much attention to economics. I thought of it as dry, boring stuff. But being here makes me realize how the lives of ordinary people are so dramatically affected by global economics.

On June 18th, there was a large rally in Harare, as well as demonstrations all over the globe, coinciding with the summit of the G-8, the leaders of the eight most powerful countries in the world. (Remember Samson Katikiti from the Students for Environmental Action of the University of Zimbabwe? He helped organize this rally. One main purpose of the rally was to call for debt forgiveness for poor nations around the world, including Zimbabwe.

The front pages of the papers here talk about the debt, the IMF, HIPC's and ESAPs almost every day. What does this alphabet soup spell out? I'm convinced that they use all these acronyms just so we fall asleep before finishing the article. But, the Odyssey investigative reporting will get to the heart of this!

To begin to understand this situation, let's go back in time, to the 1970's. Money was pouring into international banks due to an oil boom. But having money didn't benefit banks directly. The money had to be lent out in order for the bank to collect interest on the money. So banks were offering loans to many countries at a low interest rate, but did not explain that the rate would go up steeply as soon as the boom was over. They even gave loans to countries with unstable leadership or, in the case of South Africa under the Apartheid regime, despite international sanctions.

In 1982, Mexico was unable to pay its debts, and basically declared itself bankrupt. What!? A country can't declare bankruptcy, can it? This began what is known as the debt crisis, because it was obvious that Mexico was not the only country having problems paying off its huge debts.

So the International Monetary Fund (IMF) came up with a plan called the Economic Structural Adjustment Program (ESAP), which basically gives the IMF power over the economies of the Heavily Indebted Poor Countries (HIPC's) in exchange for more loans to pay off the debt they have from the previous loans! Got that? I'm not sure I do, but let's continue. It wasn't until 1991 that Zimbabwe entered the ranks of those countries with ESAP's, but the effect has been great.

Since money to pay off the debts has to come in the form of foreign currency, it is earned by exporting products, or from loans or grants. The first thing the Economic Structural Adjustment programs require is for countries to devalue their currency to make their exports cheaper. Secondly, domestic food production must be converted to cash crops, such as tobacco and cotton, for the foreign market.

Lets pretend we're farmers here in Zimbabwe. We used to grow corn or millet or some other food product that was sold within Zimbabwe. But now we're being told to grow cash crops. So we convert our fields to cotton for export. But, when it finally comes around to harvest time, something goes wrong. We don't earn anywhere near the amount we were told we would get, and end up worse off than ever! What happened?

Well, there are 41 countries that are considered Heavily Indebted Poor Countries (HIPC's), 33 of them are in Africa, and all of them are being forced to do the same thing; devalue their currency and produce cash crops. But with these countries all flooding the market with the same cheapened commodities, world prices for cash crops have plummeted. This is a benefit for the large corporations that buy up these commodities, but it brings destitution to the farmers who were persuaded to grow them and leaves the indebted nation's export earnings worse than before.

Hmmm, that didn't work! What next? ESAPs then require a reduction in public spending, particularly in essential areas such as food subsidies, health and education. Here in Zimbabwe, child immunizations and pre- and post-natal care used to be provided free by the government. Now they are not. Many people, especially in rural areas, cannot afford to pay even for these basic services. In all of Africa, only one country, South Africa, spends more money on health care than on servicing its debt. Julius Nyerere, the former President of Tanzania, asked "Must we starve our children to pay our debts?"

I've never really been interested in economics until now. I took one economics class back in high school, I think. I must have slept through it, because all I can remember is that there's something called supply and demand, and I seem to recall some sort of balance was supposed to be reached. As I look at the situation in front of me, it seems that some people are doing an awful lot of supplying these days, while others are doing an awful lot of demanding. Can a balance be reached?

Because of the way debt and interest rates work, these countries have to pay many times what they originally borrowed (I've heard quotes that say 9 or even 13 times, but I'm not sure). In 1998, despite borrowing less than they paid back, total debt in developing countries rose again by $150 billion! Jesse Jackson says that debts, "are the new economy's chains of slavery."

Recently, the G-8 forgave one billion dollars in loans to some of the most indebted nations. However, this didn't really change much, because they were what is considered bad debt. In other words, there really was no chance that those loans could ever be paid off, so they were basically just admitting that fact, but still collecting on other debts.

Some people argue that forgiving the debt would just lead these countries to irresponsible borrowing again, once they have a clean slate. What do you think? Do the banks that loaned the money have equal responsibility in the situation? Have they learned to better judge the economic stability of a country before making loans? Should these Heavily Indebted Poor Countries be deprived of some chance at economic survival just because they might repeat their original mistakes?

Since being in the Southern Hemisphere, I've noticed a curious thing in the skies at night. At home in the US, the big dipper sits in the Southern sky, ladling celestial depths up from the horizon. But here, in the Southern Hemisphere, the big dipper sits in the north, tipped over, constantly giving. Some things, I hope, change faster on earth than in the heavens.


Monica - Bon Voyage Shawn
Shawn - Leaving on a Jet Plane :-(
Kevin - When Intolerance Rises to Intolerable Levels
Kavitha - Old Ways to Make New Changes
Kavitha - From Drought to Surplus, a Tale of Success
Abeja - Visiting a Tobacco Auction
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