IOU: The Debt Threat and Why We Must Defuse It. Noreena Hertz

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СКАЧАТЬ do so until 2018. This in a country in which GDP per capita is $4,000, 40 per cent of the population live below the poverty line and annual per capita expenditure on health is only $30. And all this expense for a plant that never worked. ‘Filipinos have not benefited from a single watt of electricity,’ said the Philippine National Treasurer Leonor Briones. Thankfully not, because the plant’s design was based on an old two loop model that had no safety record of any sort; and because the plant lies along earthquake fault lines at the foot of a volcano.

      Paying for pollution and gun-runners

      ECAs do not only finance self-aggrandizing or misguided projects or corrupt elites, they are, historically, rarely subject to any safeguards, even those designed to protect human rights or the environment. Most export credit agencies, for example, have no legal obligation to screen out projects with adverse environmental and social impacts, no obligation to ensure that their projects comply with a set of mandatory human rights, environmental and development guidelines, and no obligation to consider the environmental impact of their investments or the contribution they will make to local development. Attempts to get G8 countries to agree on minimal social and environmental standards for their ECAs have resulted only in a non-binding arrangement, with companies now being asked to fill out questionnaires on their environmental and social impact. Once again, however, no procedures have been implemented to allow independent verification to take place. This clearly limited agreement was the compromise solution reached after Germany and France initially boycotted the talks, frustrated that their ECAs were losing their competitive advantage in the face of US demands for higher standards – it is ironic that Green parties were part of governing coalitions in both France and Germany at the time.

      In practice what this all means is that many of the projects ECAs end up financing – leading favourites are big infrastructure projects and resource extraction projects such as mines, dams, oil refineries and nuclear power plants – continue to be environmentally damaging and, frequently, socially undesirable as well.

      The Three Gorges Dam project in China is a perfect example. Here is a project that will force the relocation of 1.3 million people and drown 13 cities. It has been characterized by large-scale corruption and massive construction flaws and has been protested against by numerous Chinese scientists, engineers and journalists. Yet it has already received almost $1.5 billion in loans guarantees and insurance from various European ECAs. As one senior British official mused: ‘There was some problem about moving peasants there, wasn’t there?’

      Although the American ECAs are more strongly regulated than their European counterparts – President Clinton imposed mandatory standards in 1992 and 1997, which prevent them from investing in ‘projects that require large scale involuntary resettlement’ or ‘large dam projects that disrupt natural ecosystems or the livelihoods of local inhabitants’ – Ex-Im and OPIC have also invested heavily in projects with dubious environmental credentials. From 1992-8, for example, the two agencies between them underwrote $23.2 billion in financing for oil, gas and coal projects around the world. Over their lifetime, these plants will release 29.3 billion tons of carbon dioxide, the equivalent of the amount of carbon dioxide produced by 24 billion round-trip New York-Heathrow flights, an amount that would need to be offset by the planting of 48 billion trees.

      One of the American ECAs’ biggest clients during the 1990s for these kind of projects, was Enron. The Houston company’s Cuba pipeline from Bolivia to Brazil, for example, cuts directly through the world’s largest remaining dry tropical forest, and also part of the Pantanal wetlands, damaging 39 indigenous communities and several other non-indigenous communities on its way – as well as devastating the environment. It was a project the World Bank said it would not have financed. Many of OPIC’s own staff recognized it was in violation of its own guidelines. Yet no one stopped it. Indeed, this was typical of the kind of project backed by Ex-Im and OPIC.

      No wonder, as we will see in Chapter 10, Ex-Im and OPIC are currently being taken to court in the US for allegedly failing to conduct environmental reviews before financing projects that contribute to global warming. Although let’s not forget that it’s the industrialized rich world that is responsible for far more carbon dioxide emissions than the poor, a point we will return to in that chapter as well.

      As Iraq illustrates, arms sales are another category of exports which account for large percentages of ECA loans. In the United Kingdom, between 30 and 50 per cent of all export credits are allocated to cover sales by UK arms exporters – though not, since 2000, to facilitate sales to the 63 poorest countries in the world, thanks to an intervention by British Chancellor of the Exchequer Gordon Brown. This percentage is extremely high, particularly when one considers that defence exports only account for approximately 3 per cent of total UK exports. While a third of France’s export credits go to subsidize their arm exporters.

      The question of how the arms might be used tends to be considered irrelevant. It’s not only Iraq to which the British ECGD provided loans. In 1993, for example, it provided loans to the Indonesian authorities so that they could buy 24 Hawks from British Aerospace, and provided subsequent cover for a further 16 Hawk jets three years later. These same Hawks were later used by Suharto’s armed forces to attack villages in East Timor and, more recently, to deliver what the Indonesian authorities called ‘shock therapy’ against separatists in the Aceh province. A similar story can be told of Germany. On top of its ‘export über alles’ policy regarding credits to Saddam, Germany offered $407 million in export guarantees to the Suharto government to catalyse the purchase of 39 East German PT boats. When students protested against the purchase, the Indonesian government threw them into prison. France, as we saw in the previous chapter, provided export credits to its arms manufactures to finance the weapons most probably used in the Rwandan genocide.

      When the loans are used to buy arms, they frequently fuel conflicts, kill huge numbers of people, uphold repressive regimes and subject citizens to internal repression. They also perpetuate a cycle in which arms manufacturers, with loans in tow, encourage war-crazy powerful elites to borrow more and more to fund the purchases of their own weapons.

      By supporting arms sales, wealthy nations also encourage developing world governments to spend money on military equipment rather than on their health or educational needs. The money spent on one British Aerospace Hawk fighter jet, for example, could provide 1.5 million people with clean water for the rest of their lives. Export credits, deployed to serve the interests of the lender’s domestic corporations, so often end up working to the severe detriment of the borrowing countries’ populations. Those spared death from the barrel of a gun find their lives shortened by poor health care or famine.

      And the dreadful irony is that the lender’s weapons can end up being used against them. The US military, for example, has had to face troops supplied with its own weaponry in Haiti, Somalia, Panama, Afghanistan and Iraq.

      

      Export credit agencies illustrate in shocking form one of the most serious imbalances in today’s world. Not the geopolitical one in which countries with monies to lend wield power over those that need to borrow, nor the imbalance within developing countries which can allow developing world leaders to take out loans without being held to account for their use. But an imbalance that lies at the core of developed nations themselves. An imbalance of power between corporate interests and the public interest, between economics, politics and society.

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