The international economic meltdown may now include former privatization pirates, corporate financial entities, debtors and bankrupt-to-be nations, all swimming in the same toxic debt swamp, pointing fingers, shifting blame—not to mention debt to those whom they victimized.
Many countries are now using tax payer and public dollars to bail out their cronies in the private sector, under the guise of keeping the economy afloat. Witness the ongoing effort in the US to shift public dollars into private hands by bailing out bankers, finance companies, automotive manufacturing conglomerates and other “private entities”, and practitioners of capitalism amd enemies of socialism.
For national governments to assume corporate debt in desperately poor and developing countries is immoral. It rewards the rich in those countries at the direct expense of the poor. The encouragement and development of deeper and more robust democracy and stronger civil society in these countries would bring considerable pressure to bear on governments to govern in the interests of all their citizens. The IMF and the U.S. Treasury need to begin encouraging these governments to do so, rather than to pursue policies that benefit the international banks. Likewise, the IMF and the U.S. Treasury need to discourage the banks from engineering, as they consistently do in these times of crisis, the socialization of private-sector debt. (Ibid)
When it comes to national governments assuming private debt, we have a real problem today in the United States. Many of the so-called “in trouble” companies have shifted health assets and operations overseas, leaving toxic, debt-filled programs and corporate skeletons behind in the US for taxpayers to buy out.
This is the equivalent of a meatpacking company off shoring fresh meat, and leaving the e. coli contaminated product behind to be sold in the US. And, then, when people start getting sick, the government comes in, buys the spoiled meat and shells out money to pay off the lawsuits when consumers start suing.
Have we begun to reap what we have sown?
The Third World monetary crisis has been going on for more than twenty years. Way back in 1985, one writer penned a piece on how the underdeveloped nations’ debt to the industrialized countries and bankers was getting cleaned up (yes, while many of those countries were getting taken to the cleaners.)
EVIDENCE IS BUILDING that the international debt crisis is over. Gone is the nerve-jangling prospect that the world banking system might suddenly collapse as large Latin American countries proved unable or unwilling to honor their external debts.… And with Mexico leading the way, the debtor countries and their lenders are working out realistic long-term schedules for repaying the huge loans. Says Rimmer de Vries, chief international economist at Morgan Guaranty Trust Co., ''The progress in the debt crisis is coming about three times as fast as we thought possible.'' The improvement shows up most dramatically in the international financial accounts of the borrowers. In 1981, the year before the debt problem swelled to nightmarish proportions, the current account deficit of the 16 largest Third World borrowers totaled $55 billion. Morgan Guaranty estimates that last year the deficit shrank to just $12 billion. And while in 1982 the trade surplus of the six largest Latin American debtors covered just 5% of their interest bill, by (AP, 2/1985)
Now, let’s take this concept a bit further. In the past, Third World countries have paid off their debt by letting pirates from the industrialized world seize their assets in exchange for writing down debt. In short, much of the Third World has pawned its future in an effort to pay off foreign banks and international loans. In the past, up until the current worldwide crisis, which is hitting the US, debt manipulations and asset acquisition in exchange for national debt loans has been limited to the Third World. As an economics columnist puts it:
One thing I learned way back in grad school was that there was a big difference between the assets of first-world, mature-country central banks and those in rickety developing economies. The Fed and its peers had clean balance sheets, with basically nothing but Treasury bills on the asset side. Third world central banks, on the other hand, did a lot of direct lending to the private sector, and had all sorts of dodgy assets on their books. (Paul Krugman, NYT, “Third World America”, 2008)
In the past, nobody has been able to unload their debt on to others. You either pay your debt, have the loan restructured in an agreement with your lender, or declare some form of bankruptcy. However, the country-to-country, or international bank-to-country loan system is different. This is where we start pawning or selling national assets, minerals, precious stones, agricultural and manufacturing products/industries. Hence, when it comes to creditor/debtor nations, the stakes are huge, morally and economically.
Four years ago, in a piece on the flaws of international finance policy, Ross Buckley noted the difference between debt offloading on both the national and international level. Buckley wrote:
No national legal system allows debtors to offload their debts onto others. Internationally, however, this happens frequently, with appalling consequences for the poor in developing countries. It happens when nations assume liability for the foreign debt of their corporations, as in International Monetary Fund (IMF) bailouts and other debt workouts, and when portions of national borrowings go directly into the pockets of politicians and senior civil servants. The socialization of private-sector debt will be examined within the context of the three most serious financial crises of the past 30 years: the African and Latin American debt crisis that commenced in 1982, the East Asian economic crisis that began in 1997, and Argentina’s current economic crisis. (The Rich Borrow and the Poor Repay: The Fatal Flaw in International Finance , Ross P. Buckley, WORLD POLICY JOURNAL, Volume XIX, No 4, Winter 2002)
When nations “assume liability for the …debt of their corporations” they shift corporate debt to public coffers and put the debt burden onto their taxpayers and citizens. Today, in the US, those very citizens are laboring under onerous bankruptcy laws, laws crafted by the financial services industry that is now being bailed out by these self-same citizens and their yet unborn children, through the President’s bail out plan.
Joe Sixpack can’t get out of his debts easily, but his government can assume the debt of banks and financial instructions and make him and his children responsible for those debts for untold generations. And so it is that from the Congo, to Main Street USA and the plains of France, citizens are buckling under the weight of debts they have not incurred, debts incurred by corporations, banks and mega-businesses, debts which their governments assume and pass on to their citizens.
There are rumbles of discontent on Main Street, strikes in France and in many European countries and violent outbreaks over agriculture finance policies, which are causing food shortages around the world.
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