First World Greed and Third World Debt

excerpted from the book

If You Love This Planet

by Helen Caldicott

WW Norton, 1992, paper


Edmund Burke
The only thing necessary for the triumph of evil is for good men to do nothing.

Fifteen percent of the food used by U.S. homes and restaurants is thrown away ...

... just as the world environment cannot sustain 5.2 billion people, it can hardly sustain the present global population of four billion cows, sheep, pigs, and goats and nine billion fowl. It takes sixteen pounds of grain and soybeans to produce one pound of beef, six pounds for one pound of pork, and three to four pounds for one pound of poultry or eggs. Animals now eat ten times more grain than do the American people, enough to feed the entire U.S. population five times over. The production of each acre of food uses energy equivalent to 150 gallons of oil, and the processing and packaging of food alone accounts for 6 percent of the U.S. energy consumption. From 145 million tons of grain fed to animals, only 21 million tons of meat, chicken, and eggs are produced. What an extraordinary waste of soil, water, fertilizers, pesticides, and energy-and all for what return but increased heart attacks, obesity, and strokes?

The Feinstein World Hunger program at Brown University has estimated that if the world population is fed primarily with grains and vegetables, there is at present enough food to ensure the United Nations' recommended daily per capita calorie intake of 2,350 calories for six billion people. While billions starve, one-third of the grain grown in the world and half the fish caught are fed to animals in rich countries. If the world's population reaches eleven billion, its annual food production must increase two and a half times merely to maintain the current situation and low per capita output. We have work to do!

Sixty percent of the world's best agricultural land is situated in only twenty-nine countries, which house 15 percent of its population. A mere 11 percent of the land area of the planet is suitable for agriculture, yet soil erosion associated with deforestation, dam construction, and irrigation is depleting 77 billion tons of the world's topsoil each year. Our global treasure is being lost into the sea and silting up rivers. In addition, one million hectares of rich farmland in the United States are destroyed by "development"-covered with asphalt, freeways, houses, and shopping centers-equal to an area double the size of the state of Delaware...

In a world where equitable redistribution of wealth is vital, let us now discuss the financial support that the wealthy 20 percent currently give to the poor 80 percent. The United States will be our example. In 1987, it allocated $13 billion, or only 0.19 percent of its gross national product, for foreign aid, but $4.8 billion of it went for military equipment. Only $1.5 billion was for food, $3.2 billion for economic security, and $2.5 billion for development assistance. Furthermore, over half the economic and security aid was disbursed to Egypt and Israel. (In 1980, U.S. aid to Israel per capita was 120 times the U.S. aid to India.) In other words, the most needy countries were shortchanged.

Most aid serves as an instrument of foreign policy, not really as a charitable gift. For example, in 1965-66, during a famine, the United States threatened to cut off food aid to India when its government attempted to take control of U.S.-owned fertilizer companies. India capitulated because it needed the money, thereby giving more freedom to U.S. investment companies. In effect, while millions of Indians starved, food shipments were stalled to force the government to capitulate to the demands of U.S. corporations. In 1964, U.S. aid to Brazil dropped from $81.8 million to $15.1 million because America disapproved of the government at the time. These are just two instances in which the U.S. government withheld food for political purposes. Food is used to reward and manipulate poor countries rather than to feed hungry people. ~

Surprisingly, most U.S. aid actually winds up subsidizing American corporations. During the Johnson administration, 90 ,' percent of all foreign aid benefited U.S. corporate development programs, such as the building of dams, nuclear power plants, roads, and bridges in the Third World, and the profits accrued to the relevant U.S. companies. So U.S. foreign aid serves not only as a coercive instrument of foreign policy but also to support private U.S. contractors, universities, banks, consulting firms, lobbyists, and so forth. In fact, foreign aid is now recognized to be a lucrative business, and companies are scrambling to capitalize on it. Even in 1970, multinationals invested $270 million in Africa and repatriated $995 million, $200 million in Asia and received $2,400 million, and $900 million in Latin America for $2,900 million. Corporations also tend to borrow most of their investment funds for Third World projects from Third World banks.

In 1986, U.S. foreign aid expenditure totaled $15.9 billion, while Americans spent $10.3 billion on movies and theaters, $34.2 billion on tobacco, and $59 billion on alcohol. An expenditure of five cents per person would save the sight of 100,000 children who are blinded annually because of a vitamin A deficiency, and a mere three dollars each would immunize them against poliomyelitis, tetanus, whooping cough, diphtheria, and measles. One year's expenditure by the U.S. cosmetics industry would provide 1.6 billion people with sanitation.

In percentage of GNP given away as foreign aid, Norway tops all countries, with 1.1 percent. The Netherlands spends 0.98 percent. The United States ranks next to last out of eighteen countries, with, as we have seen, 0.19 percent of its GNP. Even the best of these figures is still very small.

How does the United States spend its money? In 1987, America ranked first in military spending, arms exports, military technology, naval fleets, global military bases, and number of nuclear bombs; fifth in literacy rate; seventh in per capita spending on public education; eighth in life expectancy; sixteenth in the number of women enrolled in university, eighteenth in infant mortality, twentieth in school age population per teacher, and twentieth in population per physician. These data, though not strictly financial, indicate present priorities in American society.

The United States spends about $300 billion per year on weapons, personnel, and military equipment, while the total global expenditure on them is $1 trillion. One-third of the money spent on one Trident submarine, $70 million, could eliminate malaria in the world by clearing mosquito-ridden waterways and providing prophylactic medicines to the target population, and one week of the global military spending of $20 billion could put an end to all starvation.

To quote Thomas Jefferson, "The care of human life and happiness, and not their destruction, is the first and only legitimate object of good government." Or as Dwight D. Eisenhower put it, "Every gun that is made, every warship launched, every rocket fired, signifies in the final sense a theft from those who hunger and are not fed, those who are cold and not clothed."

International aid is but a Band-Aid on the wounds of Third World suffering. The people there are not just malnourished and deprived because of overpopulation, inadequate distribution of money, lack of education, or bad land management. They are poor and starving because financial powers in the developed world exploit them to satisfy their own greed and continued affluence.


Third World debt is exacerbating global environmental degradation. Until 1973, the poor developing countries had made great strides in public health and preventive medicine, in education, and in crop production. But in the years 1973-74 world dynamics changed. The oil-producing, OPEC countries suddenly increased the price of oil fivefold, and oil became scarce. There were large and often angry lines outside gas stations in the United States and elsewhere. The oil-rich countries made huge profits and deposited their money, called petrodollars, in the world's major banks, particularly in the United States.

The banks, ever eager to profit from this windfall, decided to offer low-interest loans to Third World countries, which could obviously benefit from extra cash. The banks called this lending policy "recycling," but it turned out to be, in effect, an international lending spree, in which they unloaded petrodollars on unsuspecting developing countries.

The World Bank, which represents many of the major banks in the United States and other wealthy countries, decided at a conference in the Philippines in 1976 to lend this impoverished country $4.5 billion. It openly stated that it would rather lend to "stable" countries (that is, ones ruled by dictators) than to democracies governed by the people. Hence President Marcos of the Philippines was an excellent client. Countries with similar dictatorships received huge petrodollar loans-Chile, Brazil Argentina, and Uruguay. Other borrowers included Mexico Tanzania, and many struggling African nations. The amount of money available was vast. Lending to Latin America increased from $35 billion in 1973 to $350 billion in 1983.

Most of the loans were based on variable interest rates. During 1981-82, U.S. interest rates doubled, to 20 percent, because of tight monetary policies caused by the growing U.S. deficit, engendered by the Reagan administration's lavish spending on weapons. But each 1 percent increase in the interest rate meant $4 billion more that Latin America had to give American banks in interest payments. Furthermore, a global recession at that time decreased the demand for exports from developing countries, thus decreasing their income. Debt servicing rose from 15 percent of their export earnings in 1980 to 31 percent in 1986 in sub-Saharan Africa. Between 1973 and 1980, Third World debt increased by a factor of four, to $650 billion, and it now stands at $1.3 trillion. This is an unbelievable burden for countries whose populations are hardly surviving.

... When oil prices fell in the early 1980s, a crisis developed in Mexico, an oil-exporting country. Nobody quite grasped how severe the situation had become until 1982, when the Mexican finance minister visited Washington announced that his country could no longer continue payments on the $80 billion debt. Suddenly, the U.S. government and banks realized that the global financial system was on the brink of collapse. The banks had lent more than 100 percent of their capital to Third World countries, which appears, in retrospect, an extraordinarily irresponsible policy for them to have pursued.

A state of emergency existed, and heads of banks, officials from the White House, and the U.S. Treasury met for two weeks behind closed doors to try to deal with it. The World Bank and the International Monetary Fund (IMF), which represents most of the major banks in the Western world, produced a proposal that basically demanded that developing countries sacrifice government spending on health, education, and welfare in order to service the debt and that they increase the export of commodity or luxury goods to earn more money. The IMF became crisis manager number one and instructed banks how to contribute to the Mexican rescue. Mexico had to sign a letter of intent to earn more and spend less.

Before I turn to the dire human consequences of these restrictive policies, let me describe how parts of the loans had been misappropriated by people in the developing countries. Nearly half the money lent to Mexico was not used to benefit the people but was instead invested by rich Mexicans in foreign banks and for the purchase of foreign luxury apartments (in other words, the loans were stolen from the Mexican people).

Between 1980 and 1982, $40 billion ended up in America. And during this time U.S. banks actually went to Mexico to solicit money derived from U.S. loans by rich Mexicans to be deposited back into U.S. banks. In short, there was no overall stipulation about who controlled the loan money or how it was to be spent.

In Latin America, for instance, a large percentage of the petrodollars was used to buy expensive weapons. Military spending in these countries increased 10 percent each year during the 1970s and 1980s. In Africa, spending on weapons increased 18 percent annually. The Stockholm International Peace Research Institute estimates that 20 percent of the Third World debt is a result of military spending. It goes without saying that these poor countries do not manufacture military equipment themselves. It is made in the United States, the Soviet Union, Israel Germany, France, Britain, and other industrial nations. Each country's military-industrial complex lobbies to sell weapons to poor countries. Arms bazaars are held in many cities of the United States and other countries each year. There, phallic missiles and planes are displayed, often draped with almost naked women in bikinis. Sheiks, Third World potentates, and military men amble around the displays, idly deciding which nice missile they will purchase that day.

President Marcos misappropriated millions of dollars lent to the Philippines and deposited them in Swiss and American banks, while millions of his people were severely malnourished and lived in absolute poverty. The banks seemed to support and indeed condone such behavior. The money also wound up in other inappropriate ventures. For instance, foreign loans were used to finance a nuclear power plant constructed in the Philippines on an earthquake fault, near two active volcanoes. The reactor-never operational, because of the obvious danger- was built by Westinghouse. This fiasco now costs the Philippine people $500,000 per day in interest alone, and the profit naturally went to Westinghouse. Unfortunately, when President Corazon Aquino was democratically elected, she was forced to put debt payment above priorities for health, education, or housing, thereby violating the Philippine constitution. In 1989, about 44 percent of the Philippine national budget went to repay foreign debt, and most of the people continue to live in dire poverty.

Loans to other countries were used to finance badly planned highway systems in big cities inhabited by the rich, as well as railroads, huge dams, and power plants. These projects had no relevance to the millions of people trying to sustain an existence with poor land, archaic equipment, minimal housing, and few, if any, health care facilities. And all profits accrued to the foreign corporations that carried out the construction.

The World Bank has encouraged countries to destroy tropical rain forests to pay back their debt. In Brazil, it proposed that 5 million hectares of the Amazon be "brought under control and management"; in Ecuador, 1 million hectares; and in India, 30 million hectares. It is the same story in the Congo and in Papua New Guinea. The World Bank also approved a loan of $156 million for a dam on the Serang River, in central Java, Indonesia, which would entail the resettlement of twenty thousand people and the flooding of huge areas of forest. Similar projects have been prepared in Zaire and in Gujarat, India.

Since the Mexican crisis in 1982, the IMF has decided to impose severe austerity measures that forced desperately poor Third World countries to use more and more of their land to grow cash or luxury crops for export, such as bananas, coffee, cocoa, pineapples, and flowers, in order to help pay off the debt. Forests and virgin land are being destroyed and cultivated, producing ecological damage and leaving very little land on which the indigenous population can grow food. The people then become dependent upon cheap imported food from the United States (grown with subsidies from the American government). In the 1970s, food imports to Africa increased 600 percent, and by 1985 two-fifths of Africa's food was imported. The net effect of these policies has been to produce nations that are hostage to the American and European agricultural system and that lose their independence. Instead, foreign aid should be used primarily to establish agricultural and economic autonomy for Third World countries.

Women tend to bear the brunt of these IMF policies, for they spend more and more of their day digging in the fields by hand to increase the production of luxury crops, with no machinery or modem equipment. It becomes their lot to help reduce the foreign debt, even though they never benefited from the loans in the first place. Their health suffers, and they become tired and anemic because of poor diets. Consequently, material and infant mortality is rising in many of these countries. The price of food, too, is increasing, and wage cuts imposed by the IMF are severe. Millions of people can no longer afford adequately to feed, clothe, or educate their children in the Third World. One-fifth of the agricultural products grown there are exported to the First World. Meanwhile, as world markets become flooded with these commodity or luxury exports, the prices drop and the First World benefits from cheap luxury imports (from 1984 to 1986, the United States saved $65 million on raw materials from the Third World because of price declines). In 1986, these price cuts reduced the income of sub-Saharan Africa by $19 billion- nearly four times the amount promised in emergency aid that year. The First World determines the price of Third World-produced luxury goods. The Third World has no say!

Most of the profits from commodity sales in the Third World go to retailers, middlemen, and shareholders in the First World. Only 15 percent of the $200 billion in the annual sales of these commodities in rich countries winds up in the countries that grow them. For instance, just 11 percent from the sale of bananas is paid to the producing country. In Brazil, only 4 percent in royalties is paid for the millions of tons of bauxite (used to produce aluminum) exported to the United States. The workers in the Third World in general receive only 1 to 2 percent of the value they create. Nicaraguan coffee pickers receive 0.5 percent of the wholesale value of the coffee, while governments and rich plantation owners make $750 million per year. And tea pickers in India starve because they get only eight cents per day and food prices are high, whereas company profits in 1976-77 were $21 million. In the Caribbean, the people actually starve beside fields growing flowers and tomatoes for export to the United States.

Wealthy countries impose tariffs or trade barriers on processed goods, but none on raw materials, thus ensuring that poor countries remain in poverty. For instance, in 1985, British tariffs on raw cotton were zero, on cotton yam 8 percent, and on cotton T-shirts 17 percent. So the Third World can never break the poverty cycle, because First World tariffs work against the importation of manufactured goods from the Third World. A Third World country is defined as one that exports raw materials and imports finished goods. But processed goods are worth much more money than raw materials are.

And so the spiral continues: increased debt leads to more cash crops and environmental degradation, which leads to flooded markets in the First World and lower prices, with decreased return to the Third World. Therefore, the debt increases, and this leads to malnutrition, starvation, and helplessness.

To make matters worse, the IMF also decreed that governments of debtor nations severely curtail spending on social programs. In Mexico, whose economy has stagnated for seven years, there has been a severe overall decline in health services, education, and housing. Twelve million people are out of work; the Mexican people consume one-third fewer calories than they did in 1982, because food is more expensive. Two million acres of arable land were taken out of public agriculture because of an 80 percent cut in public funding. About 40 percent of the money that Mexico earns from exports goes to service the debt, and real wages for its people have fallen 30 to 40 percent. Mexican interest payments are $1 billion per month, the debt has actually increased by 50 percent, and the country now owes more than it did before the crisis began. And the U.S. banks call Mexico a success story-for themselves!

Huge U.S.-based corporations called agribusinesses also grow food in Third World countries for foreign markets, mainly the American, and the debt crisis ensures them a plentiful supply of cheap, if not slave, labor and cheap land. They pay virtually no taxes to the host country. Ninety percent of the protein fed to British animals comes from underdeveloped countries. The meat consumption of people in the First World accounts for a volume of grain that would feed 1.2 billion people.

In Tanzania, which organized the best health care system in Africa in the 1970s, there has been a two-thirds cut in real wages, and the system is now in rapid decline. Hospitals are collapsing, and material and infant mortality is on the rise. School buildings are falling apart, and many children no longer have the access to primary education that their predecessors had in the 1970s. This is a tragedy of monumental proportions. Even worse, it is typical of all the debtor nations.

By 1983, forty-two debtor countries were locked in repayments. Seven of them are responsible for nearly half the total Third World debt-Brazil, Argentina, Venezuela, Mexico, Indonesia, the Philippines, and South Korea. Some observers say that the international banking system would be threatened if any defaulted on their payment. In 1980, the net funds transferred as loans from the First to the Third World were $40 billion, but in 1983 the situation was reversed, and the debt the Third World owed to the First was $20 billion greater than the loans it received. UNICEF estimates that half a million children die each year because of the debt crisis. The four Latin American countries together owe $50 billion, and theirs are disastrously poor economies. How can they possibly pay this?

In Britain, the banks actually put aside or forgave half of the world debt and, in so doing, gained a huge tax relief In fact, they made enough money from this strategy to immunize 450 million children against preventable diseases. They didn't, of course. From 1987 to 1989, using these maneuvers, British banks made £1.6 billion, which is more money than the British government paid to poor countries in foreign aid. So the banks make money whichever option they choose all on the backs of millions of starving, uneducated, sick children.

Third World debt does produce complications within industrialized nations other than the inconveniencing of the banks. Normally, poor countries buy and import manufactured goods from the First World, but instead of importing a surplus of $1.3 billion of goods, as it did in 1980, when Latin America incurred a $14.1 billion deficit in 1987, they could no longer afford to buy products made in the First World. As a consequence, the United States lost two million manufacturing jobs. Meanwhile, ironically, the profits of the six largest commercial U.S. banks rose by 60 percent between 1982 and 1986. So the American workers suffer and the Third World suffers, but the banks flourish.

Inflation in the debtor nations is horrendous. In 1989 when I visited Rio de Janeiro, I could not quite grasp that new Brazilian bank notes had been printed three times in 1989. I never did come to understand the value of the different currencies, and only later did I discover that the inflation rate in 1989 reached about 2,000 percent. I also learned that behind the facade of great wealth in Rio and Brazil, owned by 5 percent of the population, existed 86 million people who suffered from malnutrition.

The total amount of money owed by the Third World is $1.3 trillion, which is a little more than the $1 trillion the global community spends on weapons each year. Debt is not a way of solving the dilemma of millions of people, and death is not a way of solving conflicts. War is obviously obsolete in the nuclear age. If $1 trillion were transferred annually from the death industry to the life industry, 80 percent of the world could feed, clothe, house, and educate itself and provide excellent modem health care and contraceptive services, while the First World could concentrate on solving the problems of ozone depletion, the greenhouse effect, deforestation, global pollution, nuclear disarmament, and species extinction.

So simple-yet so difficult because of human nature. I stayed with some wealthy investment bankers recently at Palm Beach, Sydney, who told me the world would never change, because people are selfish. I suspect they were talking about themselves.

If You Love This Planet

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