THE G8 AFRICA BROUHAHA: HOT AIR AND LITTLE SUBSTANCE

Jul 19, 2005

By Charles Abugre

The G8 was no success, argues Charles Abugre. While some of the campaigners at Gleneagles welcomed the outcome saying that “Important steps have been taken – steps that will bring hope to millions”, others were more forthright in their condemnation of the deal. The debt deal is a huge disappointment. The MPH called for the cancellation of debt owed by at least 62 countries worldwide who need debt cancellation to revive their economies and reduce poverty. Not only is the offer only to a small number of countries, an impression has been created that 100% of their debt will be cancelled. This is disingenuous. There are no specific targets on trade. The G8 agreed to agree some time soon on a time table to end export subsidies. The outcome of the G8 meeting provided another bait that could lead to several more decades of dependency and begging. Where are the leaders with a vision and substance?

The G8 (actually it is a G7 +1(Russia) + 3 (the IMF and World Bank and the European Commission) event, hyped as the last ditch effort to save Africa from itself and from poverty has come and gone. It was a show as never before. Bob Geldorf’s global rock party to Make Poverty History, some say, had at least one-third of humanity hooked to it. We rocked to explosive music beamed from 7 locations around the world, interspersed with pictures of the misery and desolation of Africans and Africa. Kofi Annan dropped in. In Edinburgh, a quarter of a million people marched, the biggest demonstration the “most beautiful small country in the world” (Scotland), had ever seen. It was all a rather odd sort of demonstration. The rulers identified with it and some even carried placards appealing to themselves. Thousands of activists filled the churches and few found themselves in running battles with high handed, even brutal, police response. These were only the staging post for the main event – the G&++++ meeting.

The Gleneagles Hotel, the meeting place of the political face of those who the run the world, is in the middle of nowhere, much in keeping with locations picked for G8 meetings in recent time. The hotel, a luxury facility for rich golfers, is surrounded by rolling hills and lush green fields. Takes anywhere from 1-2 hours to get there, if you can figure out where you are heading, driving over narrow roads and through valleys and hills. The rich and the leaders take the faster means – helicopters. The venue was effectively cordoned off by well over 10,000 police and some say up to 2 000 heavily armed American marines and special forces. The skies were filled with Chinook helicopters, if not routinely patrolling, busy intimidating the 10,000 strong “clown army” and the so-called “anarchists” intent on spoiling the party or at least sharing the media limelight.

Two and half days of meetings arranged in a hierarchy much resembling an apartheid power structure – first it was the white men among themselves, then with a G5 made up of the ‘coloureds’ (Brazil, South Africa, Mexico, India and China) and then finally the ‘blacks’ had their turn (the 7 African leaders, including Ghana led by the AU Chairman, Gen. Obasanjo) the communique was finally released. Hours before, the rock band celebrities who “negotiated” on behalf of the poor of Africa had announced to the international media that although what was being offered will not make poverty history it will save millions of African lives, and so we should prepare ourselves to celebrate. And so it was that Tony Blaire announced to a sombre crowd (sobered both by disappointment and the aftermath of the bombs that killed scores of innocent working people in London) that the G8 communique represented great progress- a “very good beginning”, he said, towards making poverty history, although he “recognises that it will not please everyone”.

True to form, when the official document was released, the campaigners gathered in Scotland were scathing in their reaction. The Official reaction of the Make Poverty History Coalition said: “Today the G8 have chosen not to do all that campaigners insist is necessary to free people trapped in the prison of poverty. Important steps have been taken – steps that will bring hope to millions. But more action is urgently needed if they are to play their role in bringing about real change for the world’s poorest people and consigning extreme poverty to the history books”. According to Oxfam GB, “The G8 have recognised today that this is the beginning, not the end, of their efforts to overcome poverty. The world’s richest nations have delivered welcome progress for the world’s poorest people, but the outcome here in Gleneagles has fallen short of the hopes of the millions around the world campaigning for a momentous breakthrough.”

But others were more forthright in their condemnation of the deal. Christian Aid called it a “vastly disappointing result which will not make poverty history”, adding that: ‘Millions of campaigners all over the world have been led to the top of the mountain, shown the view and now are being frog-marched down again.’

In the Action Aid press release, Caroline Sande Mukulira, (ActionAid’s Southern Africa programme) is quoted to have said “What Africa needed from the G8 was a giant leap forward, all it got was tiny steps. The deal that has been announced falls way short of our demands. We have some aid, but not enough, some debt relief but not enough and virtually nothing on trade. Once again Africa’s people have been short-changed.”

According to Yassin Fall of the African Women’s Millennium Initiative (AWOMI), the G8 communique is a “testimony of the determination of rich countries of the West to keep Africa subjugated by debt and unfair trading rules”.

So what was offered and how much of a “very good beginning” did this represent.

The Make Poverty History (MPH) coalition demanded action in 3 areas together- more and better aid, debt cancellation for all the poor countries needing debt cancellation to reduce poverty and reform in trade rules in 2 fundamental areas: to stop dumping subsidised products on developing country markets and to stop forcing poor countries to open up their markets through the WTO and through conditionality attached to aid and debt relief.

In terms of platitudes, there is much in the communique to warm the heart. It talks about working in partnerships not via conditionality; helping Africa to prevent conflicts and to rehabilitate their economies after conflict and contain the proliferation of small arms; support the Africa Peer Review Mechanism (APRM) to promote better governance; they will work “vigorously” to ratify the UN anti-corruption convention which none of them has signed on to (but yet some how find the moral courage to condemn others), strengthen their laws to discourage their corporations from engaging in bribery and to work towards recovering and repatriating stolen African assets held in the north and they will make Africa’s development problems a long-term concern. Nothing new here… all a leaf from the Blaire/Brown Africa Commission report.

Concrete commitments are in the following areas.

Aid

This is the bit that makes the mouth of African governments water uncontrollably and where the spin of success was at its peak. The G8 promised to boost aid by US$48 billion for all developing countries in five years of which $25bn will go to Africa. This seems to satisfy the recommendation of the AfC. The Africa Commission report called for the boosting of aid to Africa by US$25 billion per year by 2010. Thereafter, to raise aid by an additional $25bn by 2015. In contrast, the Millennium Project Report of Jeffrey Sachs called for raising aid by at least $85bn in 2006, and by a further $60bn by 2015. The MPR emphasized front loading and new money

Whilst the $48bn promise has some aid agencies dancing and the eyes of African governments gleaming, it falls short of the expectations, it is not front-loaded and it is also not what it is cracked up to be. Firstly, much of it is not new money. The MPH calculates that only around US$20 billion is new money if delivered. Some of this money is also likely to be raised through borrowing from future aid budgets, rather than new contributions. There is one thing promising, there is another delivering. The track record of delivery is rather appalling. Recall the Millennium Challenge Account announced by the United States in 2002 to provide $5billion dollars to support Africa’s development. Three years later, the United States managed to deliver only $17 million dollars to Madagascar bizarrely in support of land privatisation and the introduction of a cheque-account system in commercial banks. Countries like Ghana are still sniffing for the money they were jingoistic about when Ghana was named as potential beneficiary. Mr. Applegarth, the man Bush appointed to run the MCA has recently resigned from frustration and some say inefficiency. The Enhanced HIPC debt relief initiative promised, in 1999 a debt relief package for all eligible highly indebted poor countries to the tune of $100bn. Six years later, as the HIPC regime threatens to fold up, they have delivered $40bn less. Bush may make promises but he does not have the power to actually deliver. It is his Congress that does and that is filled with extreme neo-cons who hate foreign aid.

What will the aid be for and under what conditions will it be delivered? The spin is that the aid will come without strings, except the requirement of good governance. The Ghanaian government and pundits echo this line. Well, for starters it depends on what goes into the term “good governance”. What is mostly talked about is anti-corruption and democratic governance. Who doesn’t want that? But what does good governance actually mean? What type of government is good, for who? The term governance as used by IFIs refers to more than political accountability and democracy. It is also used to define a specific economic orientation. Over the past 20 years they have sold the idea that a good government is one that creates an “enabling environment” for business but does not itself get involved in directly providing public services like health, education, and water, or get involved in the productive sector i.e. invest in manufacturing or agriculture or employment generation. It was this good governance concept that drove the policies that dismantled the state’s capacity to deliver health and education and led to the introduction of cost-recovery, user fees and the proliferation of private for profit health and education institutions catering for a small middle class. Good governance, in their view, also means deep and extensive liberalisation, including trade and the privatisation of public enterprises and deregulation of foreign corporation. Good governance for Americans is an investment climate that reduces or eliminates taxation for their corporations, removes all barriers to the transfer of capital abroad and dismantles any protection for labour (the right of corporations to hire, fire and pay wages without obstacles or dictat. Good governance is a euphemism for a neoliberal political and economic order.

Besides the good governance conditionality the G8 agreement effectively stamped the authority of the IMF and the World Bank over the policy making environment of those expected to benefit from debt relief and aid. The debt relief package is explicit on this. It rewards those that have dutifully followed the IMF (often to the chagrin of their societies) and expects those hoping to gain debt relief to fulfil their IMF obligations fully. The IMF and the World Bank, 2 of the biggest culprits (alongside African governments and global corporations) for the demise of the continent have not only escaped blame but have been re-enthroned as rulers. This agreement has effectively plunged Africa once more into another decade of IMF/World Bank stranglehold, which means greater enforced liberalisation and structural adjustment. In addition, the Americans are very clear about the preconditions for accessing the Millennium Challenge. They include opening up markets to, and providing effective protection for, American companies. Ghana qualified for the MCA not simply because it met the democracy criterion but more so because the US Commercial assessment conducted by the US State Department rates Ghana highly for upholding the rather ridiculous intellectual property rights regime that promotes profit for pharmaceutical and other firms over saving lives. It praises Ghana’s investment laws for successfully weakening labour unions and for maintaining no restrictions to the transfer of wealth abroad by foreign companies and for being unable to regulate companies. In its “Country Commercial Guide for US Companies” the Department of State had the following to say about Ghana: “Ghana has no restrictions on transfers out of the country of dividends or net profits, payments on foreign loans, fees and charges related to technology transfer agreements and remittance of proceeds from the sale or liquidation of an enterprise”. “Ghana is in compliance with the WTO’s TRIMS and does not have performance requirements for establishing, maintaining and expanding a business. The Parliament has passed TRIPS-compliant legislation, except for the copyright bill. Foreign investors are not required to have local partners except in the fishing, insurance and mining industries. By law, the GOG acquires ten percent of all interests in mining ventures at no cost. Investment in a trading enterprise must employ a minimum of ten Ghanaians”.

“The regulatory bodies governing telecom, power and water are new and under-resourced which limits their ability to deliver the intended level of oversight”.

These are what have qualified Ghana for the MCA which it is yet to receive but the negative consequences of which are immediate to local producers.

But even assuming that the promises could be delivered with fewer strictures, is more aid always a good thing to pursue? The Millennium Project report and the AfC make a forceful case for the positive effect of aid. Aid works if it is directed to improving social and physical and social infrastructure and building the institutions of governance. Aid can improve poverty when it provides essential public services, expands government expenditure and increases economic growth. Although the aid-growth relationships are not so clear cut, expanding access to health especially HIV/AIDs, malaria and TB treatment, education water etc. has a direct positive impact on poverty. Aid provided in humanitarian forms can save lives and assist fragile communities to recover from stress and strengthen their livelihood structures.

But some aid can do more harm than good. A recent IMF report argues that aid can lead to lower growth if it distorts wages and exchange rates which in turn reduced competitiveness. Some argue that it is the size that matters. When aid exceeds 15% of GDP, it is more likely to do more harm than good because it exerts a negative pressure on absorptive capacity. But there is also a political explanation why aid dependency hurts. Higher levels of aid tend to be associated with higher corruption and the erosion of the quality of the bureaucracy. It undermines accountability by prioritising accountability of bureaucracies and the political elite to aid arrangements rather than citizens groups. Aid tends to reinforce the power of the executive over the legislature thereby weakening political checks and balances central to democratic governance. More than everything else, aid carries with it a set of ideas with privileged access to the executive, thereby effectively leading to a monopoly of the ideas conveyed by the aid system. The power inherent in this is referred to as discursive power, as opposed to directly coercive power conveyed through conditionality. Aid basically undermines autonomous thinking and the confidence to rely on domestic ideas and domestic sources of development finance. That is why we have governments all over the continent who sound and act more neoliberal than Hayek (the godfather of neoliberalism) , parroting the same things as the IMF and the World Bank and selling the interest of their people down the tube without noticing. Aid destroys democracy even more when ruling parties see their chance of continued rule in receiving disbursements aid crucial to buying patronage. Aid and independence move in different directions.

Debt

The deal is that the G8 recommends to the annual meetings of the IMF and World Bank to cancel debt owed to them by 18 countries (14 in Africa) as well as debt owed to the African Development Bank. This number could rise to 32 if the remaining countries are able to fulfil typical IMF conditions under the HPIC framework. This effectively means an extension of the HIPC arrangement but this time to include the cancellation of the principal not just interest servicing falling due. But this cancellation is not meant to be immediate. The $40bn figure is in nominal terms and will be delivered over 40 years. In Net Present Value terms, this is equivalent to only $17 bn. Ghanaians seem to have developed the impression that there is a one-off cancellation of all its outstanding debts so that Ghana has suddenly woken up to a debt-free life. That’s not what it is. Indeed the opposite is the case. Ghana is effectively married to the IMF for another 40 years before the old debt stock finally goes. Then again, a new one would have been built up.

The debt deal is a huge disappointment. The MPH called for the cancellation of debt owed by at least 62 countries worldwide who need debt cancellation to revive their economies and reduce poverty. Not only is the offer only to a small number of countries, an impression has been created that 100% of their debt will be cancelled. This is disingenuous. It is in reality a 10% deal, not including middle income countries, which offers little immediate relief. The deal excludes private sector debt and some debt owed to other multilateral institutions such as the Arab development Bank, the Caribbean Development Bank. It should also be understood that, the debt relief will be at the expense of a proportion of the ODA (aid). Also it is still not clear how the IMF will finance its debt write-off. The scale of the World Bank debt reduction will also depend on how much the donors commit to financing the debt write-off. As for the IMF bit, campaigners are hugely disappointed that the IMF will not have to sell its idle and undervalued gold but will instead depend on donor contributions and a 1999 sale-buyback agreement.

Compare this deal with the $30bn unconditional and immediate cancellation of Iraq’s debt in 2004. The African Union called for an immediate, unconditional and non-selective debt write off for all of Africa. Although they did not get anything near this, its President, Gen Olusogin Obasanjo inexplicably announced at the G8 meeting that he was very satisfied with the Gleneagles outcome and that the G8 was a great success. Was this because Nigeria had stitched a separate deal? Was this another evidence of the lack of resolve by African leaders even unable to publicly defend a collective mandate given them by the African Union? Whatever it is, Africans in Gleneagles lowered their heads in shame.

But this disappointment may well bear the seed from which a more just resolution of the African debt will arise, i.e. one of defiance and proactive ness. Nigeria afterall got a much better deal (although with severe weaknesses) because the lower house of the Nigerian Parliament threatened the Paris Club that they will repudiate if after a defined time, the Paris Club did not offer an acceptable deal. Argentina got an even better deal because they unilaterally discounted their debt by close to 70%. The task of African civil society is to persuade finance ministers to develop the courage of the trade ministers who led the Seattle walk out of the trade talks. Beyond repudiation, the real challenge, according to the veteran intellectual and fighter, Samir Amin, is to fight for an international law regulating international debt which specifies a fair and transparent arbitration process. But for now, it will be a grave mistake for anyone to rejoice over the poisoned crumbs thrown to a few poor countries.

Trade

There are no specific targets on trade. The G8 agreed to agree some time soon on a time table to end export subsidies. Tony Blaire hints that a timetable is possible and that a 2010 date is what he has in mind. There is also some vague language to the effect of recognising the need for poor countries to determine their pace of trade reforms. This language can be interpreted to mean that they expect poor countries to continue to open up their markets but will accept a slower opening. This undermines the MPH coalition’s demand that there should be explicit recognition that poor countries may have gone too far already in opening their markets and should sensibly reverse gear when necessary. The MPH demand in the WTO negotiations is a principle of non-reciprocity where the rich countries should be expected to open up their markets without requiring poor countries to reciprocate if even less steeply. They got no such signal in the communique. There was also no explicit language addressed to the IMF and the World to end the use of debt relief and loans as instruments for promoting unilateral market opening. Given the crisis of production facing African countries in particular, the refusal to reform the unjust trade rules is clearest signal of the double standards they represent.

Why in any case should leaders who preside over economies whose success is bound to pillage and injustice (historically and contemporarily|) be expected to take decisions against their own fundamental interests. Couldn’t it be that we have underestimated the power and influence of corporations that shape the agenda of governments or have we overestimated the power of charity over fundamental interests? Shouldn’t the lessons of Seattle and Doha tell us that the prospect of real change lies in the hands of the poor – people and governments – in resistance, in resolve and in holding firm to the interests of their people? Why for example did Asafo Marfo bend like a leaf when the IMF threatened to not fast-track the HIPC completion point if he did not undermine his own parliament and constitution over the poultry and rice tariff issue? Why on earth should Ghana liberalise its government procurement unilaterally when this has been reject under the multilateral framework by African countries which Ghana has been a part? There are many such questions begging for answers.

The G8 was no success. It provided another bait that could lead to several more decades of dependency and begging. Where are the leaders with a vision and substance?

Charles Abugre is currently the head of policy and advocacy at Christian Aid. He has been a development activist in Ghana and many parts of Africa and Asia. He writes in a personal capacity.

Circulated by the African news circular PAMBAZUKA, check them out at http://www.pambazuka.org

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