Debt "Forgiveness" and Food for Crocodiles


Here’s a good reason to cancel the debts of impoverished countries: in many cases, their populations never chose to borrow the money in the first place.
This is a supposedly radical notion.  Lots of institutions and global actors, from the World Bank and IMF to western politicians to non-profit organizations, talk about “debt relief,” but very few talk about the legitimacy of the debt to begin with.  Debt relief or forgiveness is packaged as a sympathetic bit of charity from the West to the world’s poor, an act of kindness that is usually attached to demands made of the recipient government.  Those demands range from the hypocritical (“stop subsidizing your farmers…only we get to do that”) to the patronizing (“demonstrate to us in writing how you will properly spend your own money that we are allowing you to keep”) to the counter-productive (“commit to austerity…”).
Even those actors sympathetic to the cause of debt relief because of the impact it could have, including increased spending on health, education, and infrastructure and the accompanying decline in preventable mortality, often shy away from making the claim that debt relief should be a right and not a privilege.  This not only lets numerous people off the hook who should not be let off the hook, it is a complete distortion of history.  And history matters.
In Africa, the vast majority of debt was accrued in the 1970’s and 1980’s under dictatorships, many of which were tossed from power in the 1990’s.  The lending that created this debt financed many things, but was almost universally processed through un-democratic channels.  In many cases, it financed the dictator’s personal consumption habits.  In many cases, it financed the repressive organs of the state, which in turn suppressed dissent and preserved the dictator’s power.  In many cases, it was used to dispense patronage to internal actors who might otherwise have challenged the status quo.  In the end, this lending helped perpetuate the rule of tyrants while doing significantly more harm than good for the populations subjected to that rule.  It funded weapons that killed children, “development” projects that destroyed communities, and further enriched some of the richest people on earth at the expense of some of the poorest.  This is the debt that developing nations are being asked to pay back today.
In fact, the story of debt in Africa is so uniform across so many countries as to allow for the discernment of a system at work.  Foreign nations help a dictator take power for political reasons, and then fund his regime to ensure it can repel any attempt at a change in government.  Lending funds the security services, the patronage network, and the dictator’s personal spending habits, which become very lavish, very quickly.  Resource extraction is streamlined at the expense of the domestic economy and to the benefit of multi-national corporations while structural adjustment programs imposed as part of debt restructuring agreements crater the middle class and the civil service.  With the economy in free fall, money starts to flow outward in the form of capital flight, further draining the economy and obliterating the tax base.  Protests are squashed with external support.  Banks lend money knowing full well it will be stolen because they make money off the lending anyway.  Governments send arms and soldiers to assist brutal tyrants.  And then, when it’s finally all over and the nightmare of dictatorship is somehow broken by the will of the people, the banks and the rich governments and the multi-lateral institutions cough loudly and ask to be paid back.
Speaking of Africa as if it is a single place is, of course, absurd; this is a massive continent of enormous ethnic, religious, racial, social, and cultural diversity.  And yet this same scenario played out over and over again.  It happened in South Africa, where western institutions now demand that the ANC repay the debts of its Apartheid predecessors.  It happened in Rwanda, where France systematically armed and supported the genocidal regime around President Juvenal Habyarimana; today, Rwanda’s government, whatever its faults, continues to pay off the debts of its murderous predecessor.  It happened in Somalia, where a brutal dictatorship armed alternatively by the Americans and the Soviets was replaced by two decades of famine and anarchy, and where the newly emerging government is being lectured by the IMF to pay back what “it” “owes” to the West. 
And, on an unimaginable scale, it happened in the Democratic Republic of the Congo, where America’s favorite “anti-communist” dictator, Mobutu Sese Seko, looted his country for more than thirty years, leaving it in ruins.  Mobutu stole billions during his time in office, funneling money from kickbacks, loans, fraudulent development projects, and even straight from the country’s budget into his own pocket.  He spent state money to take his inner circle to Disneyworld and to ferry, on multiple occasions, a number of sheep from Venezuela to his personal farm in the DRC.  When asked if it was true, despite the suffering of his people, that he was the fourth richest person in the world, Mobutu became indignant and proclaimed, “no, no, no! I am the third richest man in the world!”  When the rebel Rwandan Patriotic Front began to advance on his good friend Habyarimana and his genocidal Hutu Power clique, Mobutu lectured him by saying “I told you not to build any roads…building roads never did any good…I’ve been in power in Zaire for thirty years and I never built one road.  Now they are driving down them to get you.”  This is the man George H. W. Bush invited to the White House before any other African leader (he had at least 45 other options).  This is the man Ronald Reagan declared was a “consistent voice of good sense and good will.”
When Mobutu was forced from power, the DRC was more than $12 billion in debt, while the former dictator was rumored to have as much as $8 billion in personal wealth stashed abroad.  The new Congolese government set about to recover this wealth, claiming correctly that it belonged to the Congolese people, but Swiss banks were sadly unable to recover much of it.  In Malawi, a similar situation unfolded after the death of autocrat Hastings Banda.  The banks told the Malawian government that they would be happy to investigate Banda’s riches if the government could simply produce a death certificate.  Sadly, this certificate went “missing.”  None of this should be surprising.  After all, if Swiss banks just handed over their clients’ money simply because it was stolen from orphans and teachers and farmers, they wouldn’t be Swiss banks.
The creditors (banks, governments, multi-laterals) bear much of the responsibility for this system, of course, a fact I covered in more detail here.  But if we are keeping up the charade that these debts are owed to somebody, then the people who need to pay them back are the Mobutus and Bandas of the world.  Their money is somewhere, and somebody is profiting from it.  To claim that these debts are somehow legitimately tied to the people of Malawi or the DRC is nonsensical.  To say that these dictators represented their people in any way that carries any validity in the real world is equivalent to suggesting that Stalin was the legitimate representative of post-war Poland.  When you conquer a country and subjugate its people, does it really matter whether you live there yourself or not?
Jubilee USA is one organization that gets it.  While advocating for the one-time cancellation of all debts, a concept with biblical precedence, Jubilee also argues consistently that much of the debt owed by developing nations is illegitimate, a fact that puts phrases like “debt relief” and “debt forgiveness” into a very different light.  The fact that Jubilee is an incredibly effective organization run on a tiny budget lends additional moral credibility to its calls for change.  Donations are helpful, of course, but there are lots of ways to get involved with Jubilee’s work.  
Hastings Banda once called his political opponents “food for crocodiles.”  Margaret Thatcher once called Banda’s government “one of our closest friends.”  In short, the West helped feed Africa’s people to the crocodiles, then peered inside the belly of the beast and yelled “don’t forget to pay us back for all the money we spent raising crocodiles!”  In fairness to the creditors, they are owed quite a bit of money.  After all, as Mobutu taught the world so vividly, one can spend an absolute fortune flying sheep around the world on private jets.

How Westerners Can Help Africa Without a Helicopter

Recently a friend of mine asked me my opinion on whether or not donating aid to Africa is actually helpful for Africans.  He is involved in a church project that donates supplies to Swaziland, he said, but he didn’t know if his help was doing any good and he figured he would ask around for perspectives.  I told him that I had no idea, of course, exactly what the impact was of donating goods to Swaziland, but I did know that Swaziland is ruled by a corrupt King who suppresses democratic rights, owns a hugely disproportionate share of his country’s wealth and, for what it’s worth, occasionally marries teenage girls against the wishes of their parents.

 
If you want to help Swaziland, I argued, the best way might be to pressure Coca Cola, the largest multi-national invested in the country, to pressure King Mswati to open up the government.  Until that happens, there is little hope for economic reforms that will benefit the population as a whole and that would negate the need for donations from people living ten thousand miles away.
 
My friend said he understood that, but there was a problem.  “I want to help,” he said “and that’s not really the way I envision helping.  If I’m completely honest with myself, I envision flying into the jungle on a helicopter and saving people.”
While my friend deserves credit for being honest about this, his admission that this urge is potentially self-serving is entirely accurate.  He’s also not alone.  From Kony 2012 to “Save the Children” to the adoption craze rising and then crashing and burning in country after country, it is evident that many in the West see their role vis a vis Africans as one of spiritual, physical, and societal salvation.  For those in the West wanting to help Africans living in poverty, understanding this dynamic and its implications has to be the first step.
 
To be clear, wanting to help people is obviously a good thing, and people who want to help should be commended, not condemned.  The old saying about the road to hell being paved with good intentions was clearly not coined by somebody familiar with Africa’s post-colonial history; Africa’s road to poverty and conflict has been paved by people with decidedly bad intentions, from Joseph Kony to CIA operatives, from the executives at Shell Oil to the architects of Hutu Power. 
 
But good intentions are not enough.  Donated goods can undercut local economies, enrich warlords, and even exacerbate the very problems such donations are intended to solve.  On a macro-level, millions of dollars of aid from western countries to African nations doesn’t seem to have demonstrably improved the lives of Africa’s people.  All of which is very frustrating to the person in the West who just wants to help.
 
So how can Westerners help?
 
Answering that question begins by asking a different question: why do some people in Africa need help in the first place?
 
To the World Bank, and other major practitioners of “development,” Africans need help because they are lacking technical expertise and resources.  In Lesotho, for instance, anthropologist James Ferguson described how the World Bank undertook an enormous project aimed at connecting a rural area to the rest of the country in an effort to improve local herders’ ability to sell their livestock at the market.  Clearly, if only these Africans knew how to better leverage their resources and if only they had the money to build a road, their lives would dramatically improve!
 
Well, as it turns out, the men of the area didn’t want to sell their livestock because the disposable income would then be turned over to their wives while the men were away working in South Africa as seasonal laborers.  They very much preferred to use the livestock to barter within their own community.  As for the road, the major change it seems to have accomplished is the extension of state power over an area that otherwise had been spared the day-to-day manifestations of the machinations of a corrupt party apparatus running the country.
 
This is what happens when you assume that people are poor because they are stupid, ignorant, or lacking, say, the right farming implement.  “Development,” as Ferguson argues, consistently seems to perpetuate itself in a world in which political explanations for poverty are ignored and replaced with “technical” ones.  People are poor, in this logic, because they lack the right farming equipment, not because they lack the ability to influence how their government distributes the right farming equipment.  And it is highly unpopular to question this logic.  After all, in the words of Brazilian Archbishop Helder Camara, “when I give food to the poor, they call me a saint.  When I ask why the poor have no food, they call me a communist.”  
 
The same goes for disaster relief, which can save lives, but which never seems to be accompanied by the question of why Africans are perpetually faced with famine and starvation and thus in need of help, except occasionally by the racist, ignorant segment of the population that demands to know why we in the West are wasting our money on “those people.”  One major reason for famines in Africa is IMF policy; loans are often attached to conditions that include the reduction or elimination of government intervention in the economy, often with disastrous results for food security

The hypocrisy of this is stunning: US agribusiness is heavily subsidized by the American government, but if Malawi wants to pay its people to grow food, the IMF will punish it by demanding harsh repayment on debts that were mostly incurred when institutions like the IMF loaned money knowingly to dictators who spent the funds on alcohol and Parisian shopping trips.  In multiple African countries, the IMF has demanded an increase in exports, meaning farmers are told to grow cash crops for sale in the West rather than staple foods for sale domestically.  So, much like during the potato famine in Ireland, when food was actually leaving Ireland and being shipped to England even as people in Ireland starved to death, famine in Africa is usually concurrent with food being shipped from the starving country to countries where people are largely not starving.  It’s just that the food is too expensive for the starving people to buy.

So you’re sitting at home, watching news clips of people starving in Africa (assuming there isn’t something more important going on in the news that day to push a famine off the newscast).  You want to help.  What can you do?  My advice is to follow these rules:
 
1. First do no harm.  Many types of aid are helpful (more on that later), but many types are not.  Donating goods can often undercut local businesses and economies and put people out of work.  Imagine if aliens dropped five million pizzas on Oakland tomorrow.  How would local pizza store owners and employees feel about that?  Giving to organizations that are involved in political situations is also very dangerous unless you trust that organization to properly understand the context in which it is working.  Invisible Children, producers of the “Kony 2012” video, is a perfect example of this. In their (obviously accurate) push to denounce Joseph Kony, they have essentially promoted the Ugandan government and the Sudan People’s Liberation Army as “good guys,” which is not so obviously accurate.  If you don’t want your donated funds to go to warlords or to put people out of work, do your homework first.
 
2. Change your government.  There are five concrete things the United States government can do right now to dramatically change the lives of millions of Africans.  Stop supporting dictators.  Forgive odious debts.  Change farm policy.  Demilitarize on the continent.  Support renewable energy to prevent climate change.  Nothing we as individuals can do compares to the impact of those five actions, and it’s not even close.  We have a democracy in this country, albeit a flawed one, and even if you don’t have your own Superpac, you can still lobby your government to make change.  If that seems daunting and you just want to write a check, there are organizations working on those very issues that could put those funds to good use.  Jubilee USA works on the debt issue in a highly effective and economically efficient manner.  350.org works on climate policy.  It’s not as fun as flying into the jungle on a helicopter loaded with food supplies, but it’s a lot more effective.
 
3. Give in sustainable ways.  There are some methods of giving that are more effective than others.  I am on the board of directors at Bridges of Promise, a non-profit that helps to fund school fees for kids in rural Tanzania, and one problem our students face is that they don’t have enough school supplies.  Rather than donate 100 boxes of pencils, Bridges of Promise gave money in the form of a small business grant to a Tanzanian entrepreneur to open a stationary store.  The end result is that families don’t have to travel five hours by bus to buy supplies, local people gain employment, and if any kids still can’t afford to buy pencils, donated funds can be used to subsidize their purchases.  When giving, ask yourself: how would this donation impact a community as a whole?  Why is this giving needed?  If I were poor, would I want this type of giving done in my community here at home?

In the end, it’s never a guarantee that anything we do to help will in the end actually be helpful.  But transforming the world in which we live is impossible unless we act with both an open heart and an open mind.  Whether or not dropping food on people from helicopters is a good idea probably depends on the circumstances. What is constant, however, is the fact that if we worked to change American policy toward Africa, we could stop debating how to feed and clothe people who would not need our help being fed or clothed, if only our government stopped funding their dictators, ruining their climate, and demanding they pay back money they never borrowed in the first place.  Essentially, people in the west are donating money to Africa in a desperate attempt to paper over the vast destruction done to the continent by western institutions. 

It’s not working. 
It’s better than nothing. 

For the most part. 

UN Peacekeeping in the DRC: A Band-Aid on a Gaping Wound

The United Nations announcement that it is sending an “intervention force” to the Democratic Republic of the Congo (DRC) is sparking debate once again about the role of the UN and its peacekeeping missions in conflict zones.  This force will have a mandate to attack rebel groups rather than just defend civilians, an aggressive step aimed at preventing further war crimes in what is now the deadliest conflict since World War Two.  Many people might read this news and ask whether or not the UN should get involved in a situation like this and whether or not a UN peacekeeping force is capable of doing any good.  These are good questions to ask.  At the same time, this announcement raises a much more fundamental question about the United Nations and its role in the world; while the UN sends troops to quell the violence in the Congo, after all, some of its most powerful member states continue to support the countries responsible for the violence in the first place.  And so we are left to wonder: if the United Nations is not the collective voice of its member states, then what purpose exactly does it serve?

To answer that question as it pertains to the DRC, we must first take a step back. The conflict in the DRC is the product of both malicious and inept foreign intervention.  French support for Rwanda’s genocidal government in the early 1990’s helped spark a killing spree in that country that was more ruthlessly efficient than the Nazi concentration camps.  American, French, and British inaction on the UN Security Council ensured that UN peacekeepers stationed in Rwanda would be unable to stop the killing.  The American government was so desperate to avoid sending troops to Rwanda because of the public relations nightmare that had occurred when US troops were killed in Somalia just months earlier (i.e. Black Hawk Down) that it refused to call the genocide a “genocide:”

Elsner (Reuters): How would you describe the events taking place in Rwanda?

Shelly (State Department Spokeswoman)
: Based on the evidence we have seen from observations on the ground, we have every reason to believe that acts of genocide have occurred in Rwanda.

Elsner: What’s the difference between “acts of genocide” and “genocide”?

Shelly
: Well, I think the—as you know, there’s a legal definition of this … clearly not all of the killings that have taken place in Rwanda are killings to which you might apply that label … But as to the distinctions between the words, we’re trying to call what we have seen so far as best as we can; and based, again, on the evidence, we have every reason to believe that acts of genocide have occurred.

Elsner
: How many acts of genocide does it take to make genocide?

Shelly
: Alan, that’s just not a question that I’m in a position to answer.

The Rwandan genocide then directly led to the beginning of the Congo conflict.  A French intervention aimed at saving Paris’ genocidal allies allowed massive numbers of refugees and armed militias to flee into what is now the DRC, all at the invitation of the West’s favorite kleptocratic dictator, Mobutu Sese Seko.  Rwanda’s new government then invaded in an effort to wipe out the genocidal armies arrayed against it and funded a Congolese rebel army that marched thousands of miles to Kinshasa and toppled Mobutu.  This is known as the First Congo War.

But it is the Second Congo War, beginning in the late 1990’s, that still rages today.  Rwanda and Uganda, capitalizing on the weak government in the DRC and the geographic distance between its capital on Africa’s western coast and the resource-rich hinterland in the East, began attacking the DRC again, ostensibly to fight the remnants of the genocidal militias, but with a far more sinister motive in mind: resource extraction.  Rwandan and Ugandan backed rebels massacred civilians, looted valuable minerals, employed slave labor and child soldiers, and even in one instance took apart an entire factory and moved it across the border into Rwanda.

All the while, Rwanda and Uganda have continued to be the darlings of Western governments and corporations.  Foreign companies have profited from the conflict in the Congo, in some cases even doing business directly with murderous rebel groups.  Rwanda and its clean streets, female-heavy legislature, and environmentally conscious leadership is supported heavily by Western countries and wooed, often patronizingly so (“a functioning African state! Oh my!) by Western companies and religious groups.

Every reputable independent report on the conflict has concluded that Rwanda and Uganda are largely responsible for the millions of deaths in the Eastern DRC.  In December, independent organizations called on the US to sanction Rwanda and suspend all military aid to the country, arguing that “US efforts at ‘quiet diplomacy to address Rwandan involvement in eastern Congo have failed to deter Rwanda’s continued incursions and use of proxy armed groups.”   If the United States and the UK put pressure on their allies, they could influence the situation in the Congo.  Instead, the United States is supporting the creation of the UN “intervention” force designed to stop the bloodshed that its own allies are perpetrating.

If this doesn’t make much sense, it’s because in one fundamental way, the United Nations itself doesn’t make much sense: if the UN is the collective voice of its members, why does it so often intervene in ways that conflict with the actions of those members?  It is not clear what level of success the UN will have in the DRC, though it’s easy to be pessimistic about its chances.  It is also not clear whether the deployment of peacekeeping forces in general is the best method for protecting innocent people and bringing an end to conflicts.  What is certainly clear is that supporting UN peacekeeping missions gives powerful countries a means for appearing to proactively support a peace process without actually having to take the difficult step of interrupting the business of capitalism and resource extraction.

And so the UN force arrives as a band-aid on a gaping wound.  If the UN fails, as it has so often in the past, it will certainly be roundly criticized by those who consider it weak and inept.  But perhaps that is not fair to the UN.  International institutions are, after all, only as good (in any sense of that word) as the countries that run them.  The irony is, then, that what would make the UN a force for good in the world is if its member states were forces for good.  But if the conflict in the DRC teaches us anything, it’s this: if the UN member states were forces for good, we wouldn’t need a United Nations at all.

The Boston Bombings and the Real Enemy

The bombing last week in Boston is a tragic reminder of the pointlessness of violence.  Whatever political agenda the alleged bombers had, it is difficult to see how it could be advanced in any meaningful way by killing an 8-year old boy.  If the motive was indeed related to America’s conflict with segments of the Islamic world, the bombing is yet another example of the failed strategy of killing innocent civilians in retribution for western government policies; the response to such killings is usually just an intensification of those very same policies.  Just ask a Palestinian.

At the same time, beneath the dominant blanket of media coverage focused on the attack, there are Americans asking questions about the manner in which the Boston bombings have been treated in American society.  Why is it that the three tragic deaths in Boston received such a disproportionate amount of media attention relative to the fourteen tragic deaths at the site of the fertilizer plant explosion in Texas?  If the answer to that question involves the distinction between murder and natural disaster, then why do routine triple-homicides in America’s inner cities not receive similar outpourings of grief?  And how would the media be covering the Boston attacks if the perpetrators had been native-born Americans protesting U.S. tax policy rather than immigrants protesting U.S. foreign policy?

At the heart of these questions is a very simple perspective: our media’s obsession with this case and with the Muslim, Foreign, Chechnyan, Immigrant, Jihadist brothers at its epicenter demonstrates a very skewed perspective on the value of human life and on the unity of the human race.  The enemy is defined as anti-American terrorists.  If “we” is defined as Americans, then this makes sense.  But if “we” is defined as humanity, then a very different enemy needs to be identified.

That enemy is violence.  Violence, in all of its forms, leaves a path of hatred and destruction in its wake.  A path of dead children and grieving mothers and broken lives.  This notion isn’t merely the expression of a particular political, religious, or even spiritual ideology, but rather the acknowledgement of a central truth: for every instance in which violence has allegedly made life better in some way, there are literally thousands of instances in which violence intended to do good has destroyed lives.  This is a practical argument.  Violence, as an ideology, as a tool, has failed.

So if we as Americans can identify violence and all of its manifestations (Sandy Hook, Boston, the streets of Chicago) as the real enemy, then we are faced with a very simple proposition:  Either we believe a dead Congolese child is just as important as a dead American child, or we don’t.  Either we believe that the families of dead children in our inner cities suffer a grief just as powerful as that of the families of the suburban victims in Aurora, Colorado, or we don’t.  Either we believe that Palestinian lives are as valuable as Israeli lives, that Afghan lives are as valuable as French lives, or we don’t.  And either we believe that children in Mozambique do adorable things and have nicknames and spend nights looking up at the stars and wondering about the nature of the universe and when they are taken from their families way too soon the loss their parents feel is as debilitating and crushing as it would be if our children were taken from us, or we don’t.

If we believe that, then our actions need to reflect it.  Our media coverage needs to reflect it.  Our government’s policies need to reflect it.  If we as Americans believe so highly in the value of human life, we should urge our government to stop supporting dictators, to stop using drones to attack funeral parties, to stop exporting weapons.  We should pass gun control measures that are supported by more than 90% of NRA members and could curb gun violence.  We should support economic policies that decrease food insecurity in areas of the world vulnerable to famine.  Caring about human life has to mean more than just wearing a “Boston Strong” shirt and shaking our fists at the terrorists.

There are some cynical reflections on Boston floating around cyber space that in essence imply that given the discrepancy in media interest between the loss of white/American life and the loss of black/brown/foreign life, perhaps we should all just care less about what happened at the marathon.

No.  We should care more.

Every child’s death should matter as much as 8-year old Martin Richard’s.  In a photo released to the Boston Globe, Martin, who was killed in the bombing attack, is shown holding a sign that says “No more hurting people.  Peace.”  Maybe that’s partly what makes the death of children so painful: in some sense, they are better than we are, because they know so much less and yet they know so much more.  They get it.

Remarks at USF Commencement Ceremony

I made the following speech at the University of San Francisco graduation ceremony on Friday, December 14, 2012.

Fr. Privett, Members of the Board of Trustees, Dr. Bartlett, Deans and Faculty of the college.  Thank you.  On behalf of all the graduates, I would like to thank all the family members and friends, including my own, who have supported all of us as we’ve pursued our education.  To those family members and friends here in this church today, and to those who could not be here today: Thank you.  The least we can do to honor you is give you a round of applause. 
My first visit to Africa was about five years ago.  I was young, and according to the new studies my wife tells me about with excessive enthusiasm, my male brain was not yet fully developed.  I was single, had never been to a developing country before, and went to Tanzania mostly because the idea of traveling outside my comfort zone scared me and I didn’t want to not do something potentially meaningful just because it scared me.  Clearly my brain was not fully developed.
I was also very eager to make a difference.  The Africa I thought I knew was the Africa of Save the Children brochures: poor and in need of help.   I was comparatively rich and looking to help…surely this would work out.  Well…my first foray into helping was as a nursery school teacher, during which time I likely did not revolutionize the East African educational system, to say the least.  Mostly I spoke in English and said many incredible things which were probably not as incredible to the kids I was teaching, who did not speak English.  It was a little discouraging.   So when another volunteer told me about a local orphanage that needed help, I signed up.  The orphanage, I was told, was called Matumaini, the Swahili word for “Hope.”
There were twenty kids living in this orphanage, sharing 4 beds.  Each kid had exactly one outfit of clothing.  Volunteers in our program donated money to build a chicken coop and bought mattresses for the beds.  Never before had I felt so strongly that something was black and white.  These kids needed help, and we had money.  It was simple.
When I returned to Tanzania two years later, Matumaini had twice as many beds, with a fully functioning chicken coop, mattresses on every bed, and a staff of three full-time employees.  It also had twice as many kids.  Some “orphans,” I was told, were not even really orphans.  Poor families decided to send them to Matumaini where they could be guaranteed regular meals, but breaking families apart in the process.  It had never occurred to me to think about a method of help that might avoid such a problem because I never foresaw the problem in the first place.  Things were not as simple as I had thought.
When I started the International Studies program at USF, I was hoping to gain some clarity.  I can’t say that it came right away.  Mostly, my classmates and I just got depressed as we learned about the intractable conflicts and problems facing the world and the unintended consequences stemming from noble efforts to make things better.  We learned about how a campaign to donate shoes to Africa destroyed the domestic shoe industry in one country, eliminating jobs and fostering dependence.
This was a monumental downer.  Presumably we were getting this degree to go do some good in the world, and yet the merits of even the simplest acts of giving were now being questioned.  For the students in our program, it was a serious challenge we had to meet: how to remain positive, how to remain engaged, and how to adapt our thinking to understand that the world’s problems are more complex and multifaceted than we had realized.
It was also a challenge that was unquestionably necessary.  What I experienced in Tanzania, but didn’t realize until I got to USF, is that good people want to help, but they also want to feel helpful, and sometimes feeling helpful and helping are not the same thing.  And sometimes the difference between the two consists of a gap in knowledge: knowledge of other cultures, of other people’s motives, even of global systems. USF helped us to fill in those gaps, but it also helped us to recognize them.  Understanding what we don’t understand made us more likely to listen, more likely to question, and more likely to dig deeper to find the root of problems. 
Therein lies the beauty of our education.  The world, after all, does have problems, and those problems do have solutions.  USF helped us to figure out what they might be and what we can do to help.  It is inspiring to feel that you have a better understanding of the world than you did just over one year ago, and that you can attribute that improvement to something more than just brain development.
Gandhi once said that “nothing you do as an individual matters, but it is vitally important that you do it anyway.”  I am hesitant to be the first person in graduation speaker history to disagree with Gandhi, but here I might venture to argue that he was being a tiny bit pessimistic.  At USF we learned much more than simply how to slave away against impossible odds. We learned how to understand the world so as to acquire the humility necessary to realize that our schemes and programs are often not as obviously brilliant as we would like them to be.  We learned how to then not give up on trying to make a difference.  How to then have a real impact on the world.  So with apologies to Gandhi, if there’s one thing I learned at USF, it’s this:  Everything you do as an individual matters, and it is vitally important that you do it. 

Court Ruling Gives Argentina More Time to Fight Vultures

Court Ruling Gives Argentina More Time to Fight Vultures

First Posted at Jubilee USA Network’s Blog the Debt:
http://jubileeusa.typepad.com/blog_the_debt/2012/12/court-ruling-gives-argentina-more-time-to-fight-vultures.html#more
 By: Andrew Hanauer

The “Debt Case of the Century” took a surprisingly positive turn this past week when a U.S. Court of Appeals ruled that Argentina has more time to appeal a ruling against it in its battle with vulture fund creditors.  Argentina had faced a December 15 deadline to make a terrible choice: pay the vulture funds that are holding the country hostage or default on all of its creditors.  For now, at least, that choice will not need to be made.

The appeals ruling was made in response to a ruling by U.S. Judge Thomas Griesa that Argentina could not pay back the creditors which had accepted a debt renegotiation with the country after its 2002 default unless it also paid back the small minority of creditors that refused to accept the deal.  Those creditors are largely so-called vulture funds that swooped in and bought Argentine debt at rock-bottom prices and then sued for repayment of the full amount of the original loan.  Griesa ruled that if Argentina did not pay back the vultures along with its other creditors, any bank that accepted repayment on behalf of those other creditors could be found to have violated the law.  As a result, Argentina would have to choose to abide by the ruling and pay the vultures or not pay anybody and default.

The appellate ruling now gives Argentina more time.  But the ruling itself may have had little to do with Argentina’s compelling moral arguments against the vultures and more to do with the complaints of Argentina’s other creditors, which argued that it was unfair for the vultures to receive 100% payment when the vast majority of stakeholders were accepting only 25-30%.  As Business Insider points out, this argument has far-reaching implications for international debt: “After all, why should any creditor accept a restructuring deal at all if another bond holder can hold out and get all their money?”[1]

Confused?  You’re not alone.  One of the struggles of the debt relief movement is that clear and compelling moral issues, often determining the fate of some of the world’s poorest people, are shrouded in the technicalities of international finance.  Argentina’s battle with the vultures is no exception: the issues are confusing and the stakes are high.  In the hopes of providing some clarity, here is some historical background on the situation.

The plot of Argentina vs. The Vultures is captivating enough for a Hollywood movie.  Such a movie, to accurately capture the essence of this story, would need to start with Argentina’s brutal military dictatorship of the 1970s, during which time 30,000 Argentineans “disappeared.”[2]  The dictatorship borrowed heavily from foreign creditors, racking up large sums of debt largely in an effort to fund repressive institutions and enrich corrupt leaders.  By the time the dictatorship ceded power in 1983, the country was more than $45 billion in debt.[3]

When dictatorships borrow money, the subsequent debt is often labeled as “odious” or “illegitimate” on the grounds that the loans were not incurred with the consent of the nation’s people and were often spent on projects that brought little public benefit.  Such lending also has been shown to fuel capital flight (the act of sending money abroad where it cannot be taxed or later recovered) and to incentivize leaders to loot natural resources.  It also has helped tyrannical regimes maintain power longer. 

In Argentina, lending did all of the above, but it also led to more lending aimed at paying off the dictatorship’s debts.  Such lending is not odious in the classical sense because it was borrowed by a democratic government, but it is the direct result of illegitimate loans.  This is crucial in the Argentine case because some of the country’s creditors are claiming that Argentina’s current debt is legitimate because most of it came after the military regime was ousted; however, new loans are used to repay old loans, which is how the debt cycle continues.

As Argentina’s debt grew ($148 billion by 2001), the country implemented a number of austerity measures at the behest of the International Monetary Fund, and its economy only got worse.[4]  In 2002, the Argentine government dramatically altered course, rebuffed the IMF, and initiated a remarkable economic turnaround.  The government “re-nationalised key productive sectors like aviation, pensions and most recently oil, increased social protection and income transfers to the poor, and reduced poverty substantially. Real wages have increased, and wage inequalities have been reduced.”[5]  Argentina is now a dazzling economic success story, one of the strongest economies in the world just a decade after a period of instability so severe that at one point the country had five different presidents in two weeks.[6]

At this point we reach the beginning of the current drama.  Argentina defaulted on its debt, but offered to renegotiate it and even paid off the IMF in one lump sum (to achieve economic freedom) rather than declare its debt odious and repudiate it.  Despite only being offered 25 to 30 cents on the dollar, roughly 90% of creditors accepted the deal, and Argentina has been paying them back, mostly from its currency reserves.  Under United States bankruptcy law, if 70% of creditors accept a certain course of action, the so-called “hold-out” creditors must do so as well.  And yet a group of hold-outs, mostly hedge funds that bought Argentine debt at record-low prices, have refused to accept any rescheduling and continue to demand that Argentina pay them back in full.  These are the vulture funds.

The lead vulture fund in this case is NML Capital, led by billionaire vulture capitalist Paul Singer.  Singer has gone to such great lengths to try to compel Argentina to pay him (which Argentina’s president has vowed she will never do) that he even recently orchestrated the seizure of an Argentine naval vessel by authorities in Ghana on the grounds that Argentine property was subject to confiscation given its outstanding debts.

Do Singer and his fellow vultures have any standing whatsoever to demand repayment on these debts?  No.  Aside from the fact that the debt was largely illegitimate in the first place, the vultures refused to accept the terms of the vast majority of Argentina’s creditors.  They could have received repayment, but chose instead to be intransigent.  More importantly, they are merely speculators, not legitimate lenders. They bought the loans at rock-bottom prices, illustrating the risk they were willing to take as multimillionaires gambling for either a large payout or a loss of insignificant proportions to them.

Argentina is not the only entity to take issue with the vultures.  In the latest court case, the country’s other creditors – the ones who accepted the renegotiation – argued that it was unfair that the creditors who negotiated with Argentina in good faith should have to accept 25 cents on the dollar for their loans while the vultures received repayment in full.  They further argued that Judge Griesa’s ruling was harmful in that non-holdout creditors would be completely denied even the lower rate of repayment if Argentina refused to pay the vultures and opted for default.

In this sense, “hold-outs” is truly an apt phrase for Singer and his fellow vultures.  Because of their refusal to accept large profits on loans they never made rather than the astronomical profits they now seek, the hold-outs are dragging an entire country and its creditors through a drawn-out legal process, threatening an entire sub-set of international financial norms in the process.  All the while, they continue to hold Argentina hostage, both figuratively in American courtrooms and literally in a west-African port.  Hostage-taking: even actual vultures don’t do that.  

Photo of the President of Argentina Cristina Fernández de Kirchner.


[1] Business Insider, “Now We Know How Argentina Wants to Resolve Its Battle with Hedge Funds,” by Linette Lopez, November 29, 2012.  http://www.businessinsider.com/argentina-solution-to-hedge-fund-lawsuit-2012-11#ixzz2E9uwSRtA
[2] Dearden, Nick, “Argentina Showed that Justice Means Standing up to Financial Markets,” Huffington Post, August 8, 2011.  http://www.huffingtonpost.co.uk/nick-dearden/argentina-showed-that-jus_b_920872.html
[4] World Bank, 2012
[5] UKGuardian, “Why Argentina is Now Paying for its Dangerously Successful Economic Story,” by Jayati Ghosh and Matias Vernengo, December 3, 2012.  http://www.guardian.co.uk/commentisfree/2012/dec/03/argentina-paying-economic-vulture-fund
[6] Dearden, 2011

Lending to Dictators: Bad Loans, Good Business

Lending to Dictators: Bad Loans, Good Business

Walter Wriston, former Citicorp chairman, declared that “Countries never go bankrupt.”

By: Andrew Hanauer\

Published on Jubilee USA’s Blog the Debt, http://jubileeusa.typepad.com/blog_the_debt/2012/12/lending-to-dictators-bad-loans-good-business.html#more
Consider the following narrative: a western creditor, perhaps a bank or a government, lends money to an African country.  The African country is run by a dictator, an eccentric man who has changed the name of his country from a western colonial moniker to that of an authentic African word at the same time that he spends much of his free time shopping in Paris.  The money loaned to this dictator, shockingly, does not go to build a hospital in a rural area.  It does not go to build roads or wind farms.  It does not create jobs.  It is spent on foie gras and champagne, two of the dictator’s favorite things, and perhaps on the guns necessary to ensure that nobody else takes his place.  It is spent on a villa in Spain and an apartment in Central Park West.  It is spent, in short, on the dictator himself, though the loan will be repaid, of course, by the public.  A selfish act, yes, but champagne can be very expensive…

This type of situation is the epitome of “odious debt,” a term used to refer to debt that is incurred for illegitimate purposes by a dictator but paid back by the democratic government that follows.  Academics and activists are fond of invoking odious debt as a moral and legal framework within which to call for the repudiation of some developing nation debt, particularly with regards to Africa, where a wave of democratization in heavily indebted countries swept away some of history’s longest serving dictators in the early 1990s.  The narrative above is a common one, and is often advanced by advocates of the repudiation of odious debt.  It is compelling, and features a clear cut villain (dictator) and victim (Africans).  What it lacks, however, is a proper understanding of the third party involved in odious debt: the lender.

In the developing nation debt conversation, creditors are often portrayed as neutral third parties.  Yes, it is acknowledged, they lent to dictators, but they were misled by false promises and their kind-hearted attempts to reform broken African states were thwarted by corruption and greed.  Their money was stolen, and now they are forced to choose between demanding repayment from some of the poorest people on earth and accepting the claim that they are not entitled to repayment at all.  In some cases, they are accused of having been negligent (“they should have known better”), and thus bearing some responsibility for the debt problem, though not moral culpability.

This façade of neutrality does not account for the numerous incidents in which western lenders deliberately lent money to repressive regimes despite full awareness of both the nature of the borrower and the final destination of the borrowed funds.  This lending had catastrophic effects on African countries and their people, and was entirely avoidable.  In some cases, lenders extended loans to further their own economic interests; in other cases, western governments lent money solely for political reasons.  Sometimes loans were pushed for internal institutional reasons, and reflected a broken system more than a sinister manipulation by a particular entity.  Regardless, creditors have interests and motives for lending, and those interests often matched those of the borrowing despot for selfishness and greed.  Lenders are not neutral.  And they deserve a starring role in any accounting of Africa’s odious debts.

Perhaps the symbol of irresponsible lending is former Citicorp chairman Walter Wriston.  Wriston (in)famously declared that “sovereign nations don’t go bankrupt,” essentially implying that long after a dictator has left office, the residents of a country will have the capacity to pay the bill, no matter how poor they might be.[i]  So even if a despot were to flee with his stolen loans and stash the money in an opaque Swiss bank account, a lender could rest assured that repayment would come, and with interest.  In the 1960s and 1970s, lenders took this assurance to heart, giving billions of dollars to kleptocrats, tyrants and military dictatorships, knowing full well that much of it would be stolen, laundered and/or used to repress dissent.  These loans are now being repaid by citizens of African countries who rarely benefited from the money in the first place, while the creditors have in many cases received repayment for the original loan plus huge sums in interest.  And in many cases, the loans actually perpetuated autocratic rule, thus consigning Africans to additional years of dictatorial rule and its accompanying misery.

Why, one might ask, would western governments and private creditors do this?  Unfortunately, a number of perverse incentives exist for loaning money to dictators:

  1. It’s the money.  If you’re confused as to why creditors would lend money to thieving dictators given the financial risk, just remember Walter Wriston.  If countries don’t go bankrupt, creditors don’t lose their money.  And while it may take years for the country to pay back the loan, the accrued interest often means the creditors make a hefty return on their original “investment.”  These loans are often accompanied by upfront fees which the creditors simply take out of the amount of the loan.  The borrowing despot doesn’t care, because he’s still getting free money.  But the people stuck with the bill pay that much more. 
  2. It’s that time of year.  Economics professors Leonce Ndikumana and James K. Boyce note that for many creditors, including multilateral institutions such as the World Bank, lending money near the end of a fiscal quarter is deemed critical.  After all, “failure to use appropriated funds by the end of the fiscal year may trigger reduced appropriations the following year.”[ii]  As a result, loan agents are urged to push loans regardless of the recipient, and “a loan officer who delays loans…owing to concerns about leakage of the money into private pockets…is not on the fast track to a promotion.”[iii]
  3. It’s the Communists (or Terrorists).  Much lending is also done for political reasons, regardless of the human rights record of the loan recipient.  Mobutu Seso Seko is the most commonly cited example of this; the Zairian dictator was a notorious kleptocrat who stole billions of dollars from his impoverished citizens and ruthlessly repressed dissent, but he was friendly to the West.  The end result was that the money kept flowing, and while Mobutu’s personal wealth was estimated in the billions, the Democratic Republic of the Congo (DRC) now has a debt burden hovering around $10 billion.  In short, creditors got paid, Mobutu got rich and the DRC got stuck with the bill.

Law professor Anna Gelpern argues that in many cases, odious debt is certainly odious but it is not truly debt.  That is, many of the loans made by western governments to African dictators, particularly those made for political reasons, were essentially grants and not loans, but had to be classified as loans to garner domestic support.[iv]  That African countries are now paying back these obligations is a result of the lack of western domestic support for such assistance to dictators in the first place, and speaks to the odious nature of these “debts.”

Realizing the extent of western complicity in Africa’s debt crisis should call into question many of the assumptions we make about both Africa and the West.  So often, western institutions are portrayed as neutral arbiters of senseless third-world conflicts or problems.  So often, the truth is murkier.  Westerners seeking to help the third-world through programs and aid might first want to push their governments to obey the Hippocratic Oath, and “first do no harm.”


[i] Ndikumana, Leonce, and Boyce, James K., Africa’s Odious Debts, Zed Books, 2011, page 29
[ii] Ibid, page 23
[iii] Ibid.
[iv] Gelpern, Anna, “Odious, Not Debt,” published in the Journal of Law and Contemporary Problems, 2007.