Food Emergency: How the World Bank and IMF Have Made African Famine Inevitable
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Throughout the '60s and '70s, Western financial institutions went on a lending spree at extremely low interest rates, mostly to developing countries that were encouraged to borrow. By the late '70s and early '80s, U.S. interest rates soared to levels as high as 21 percent, devastating the fragile economies of developing nations that had taken on massive debt.
Klein compares the impact of this “debt shock” to “a giant Taser gun fired from Washington, sending the developing world into convulsions." African countries could barely afford the sky-high interest payments, let alone the actual debt and were thrown into a downward spiral of financial crises. This is where the story of Africa’s famine truly begins.
'The Dictatorship of Debt'
The erosion of African agriculture is due in large part to policies imposed on debt-ridden African countries by the World Bank and the IMF—financial institutions set up in the aftermath of World War II with the stated aim of deterring financial crises like the ones that pushed Weimer Germany toward fascism.
The donor nations of the IMF and World Bank divvy up power within each institution based on the size of a country’s economy, allowing a handful of privileged nations, led by the U.S., to dominate decision making. As a result, Klein explains that the pro-corporatist administrations of Reagan and Thatcher in the '70s and '80s were “able to harness the two institutions for their own ends, rapidly increasing their power and turning them into primary vehicles for the advancement of the corporatist crusade.”
Driven by the ideology of the so-called free market, the IMF and World Bank attached conditions to desperately needed debt relief that required developing nations to implement Structural Adjustment Programs (SAPs), what Naomi Klein calls “the dictatorship of debt.”
SAPs forced governments to impose a neoliberal package of austerity, privatization and massive deregulation. For Africa, this meant cutting government subsidies to small farmers, eliminating tariffs and price controls, selling off food and grain reserves (which kept countries from starving in cases of drought or crop failure), increasing cash crop exports of raw materials to the west, and allowing foreign imports from the US and Europe to flood their markets.
Although the IMF and World Bank argued that restructuring was necessary to reduce Africa’s debt and foster economic growth, their policies produced the opposite effects: soaring debt and economic stagnation.
In a 2004 studycommissioned by the Halifax Initiative , writer Asad Ismi meticulously documents the consequences of SAPs on the African continent. Between 1980 and 1993, he founda total of 566 structural adjustment programs were forced onto 70 developing countries, including 36 of Africa’s 47 Sub-Saharan nations. Since the implementation of SAPs in the 1980s, Africa’s debt soared more than 500 percent, with an estimated $229 billion worth of debt payments transferred from Sub-Saharan Africa to the west, four times the original debt owed. According to the IMF’s World Economic Outlook Database, African debt still stands at $324.7 billion , with the overwhelming majority, $278.5 billion, owed by Sub-Saharan Africa, demonstrating that SAPs have pushed Africa into perpetual debt, with no end in sight.
What does this have to do with famine? Well, perpetual debt forces governments to divert spending to debt repayment, rather than investing in basic infrastructure like healthcare and education, which is relatively non-existent in Sub-Saharan Africa. With only 10 percent of the world’s population, the Sub-Saharan region comprises 68 percent of all people living with HIV. Yet, according to Ismi, “Africa spends four times more on debt interest payments than on health care.”