Descending from the high moral ground to the G8 summit

the debt relief that never was

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APPLAUSE filled the cavernous nave of St Martin's Church as Clare Short swept down the aisle. It echoed too from outside where thousands more protesters against Third World Debt gathered around loudspeakers in the centre of Birmingham's Bull Ring around which 60,000 demonstrators had gathered on Saturday. "Please welcome," said Rev Michael Taylor, "our kind of Secretary of State for Development". By "our kind" the former director of Christian Aid - who is now president of Jubilee 2000, the organisation which had brought protesters to the G8 summit - meant one who speaks the language of the non-governmental organisations to which the protesters belong.

And speak it she did. She talked of the potency of symbolism. Of how today showed that compassion fatigue was far from dead. Of how self-fulfilling cynicism must be banished. Of how optimism and principle and determination could move mountains. Of how, having lost an empire, Britain had at last found a role in working for justice in the developing world. Of how world poverty could be halved within 20 years and eradicated within our lifetime.

There was some good natured heckling when she got to the point of talking about the nations which qualified for relief under the Heavily Indebted Poor Countries Initiative (HIPC) which the rich world has agreed. "Not enough, Clare," a chap at the back shouted. And she was able to agree, but talked about progress in the right direction and outlined a five-point plan.

But then the time came for the final speech before the demonstrators were to pour out to form a human chain around the world leaders' conference centre. A quietly spoken man named Ed Mayo, Jubilee 2000's chairman, who is director of the New Economics Foundation, stood up and began to take issue with the five points.

Point One spoke of "maintaining the momentum" on HIPC and yet there was no momentum. It was not working. Before he could finish the Secretary of State, who had sat shaking her head as he spoke, sprang to her feet and pushed him from the microphone to re-address the audience. Mr Mayo had got it wrong, she said, he was one of the cynics. He waited until she had finished and moved onto Point Two. Halfway through that she sprang up again. Then she did it a third time. The audience, which was expecting to be fired up and sent out onto the streets, was clearly deflated by the untimely bickering.

Yet the exchange was a paradigm of the debate on debt, in which everyone can agree on the sweeping statements about poverty-reduction and yet fall out over the detail in which the devil is supremely to be found.

The trouble with Third World Debt is that it is an extremely complex issue. You would not think so from some of the ignorant comment on the subject this week which subjects the intricacies of international economics to the homespun nostrums of running a sensible household budget. Platitudes like "where would we be if people did not pay back what they borrowed" take no account of the imbalance of power which lies at the heart of the relationship between the First and Third Worlds.

Yes, poor countries borrowed heavily in the Seventies. But they were persuaded to by Western banks and governments which pointed out that, as interest rates were lower than inflation, you'd be a mug not to borrow. Many of the loans were made recklessly by banks which were awash with money - deposited by oil producers after the oil price hikes - and needed to find someone to borrow to raise the interest they needed to pay the oil depositors.

Why didn't they invest the money productively? True, corrupt Third World leaders stashed chunks of it away in Swiss and New York banks and about a quarter was spent on buying arms. But in the early years most of the money was used buying oil at the newly-increased prices. The sums borrowed have been repaid. Yet the debt has increased exponentially from the build- up of unpaid interest following the massive increases in interest rates which occurred until the monetarist policies introduced by the West in the early Eighties.

This is not to say that Third World leaders bear no responsibility. Only that significant responsibility must be borne by others too - from reckless banks to Western politicians who deregulated international capital flows to the point where massive debts could be built up unchecked. There seems, in yesterday's resoundingly vacuous words from the G8 summit, no recognition of that at all. The measures which might realistically have been implemented are set out in the editorial opposite. Yet almost nothing was done. It is hard to resist the conclusion that debt has become too convenient a tool with which to coerce the Third World into turning over control of its economic life to Western multinationals.

What is clear is that the only people free of responsibility are the very ones being asked to bear the brunt of the economic adjustment which poor countries are undergoing to find the cash to pay the debts. It is the poorest people who are losing their jobs under the economic liberalisation and privatisation programmes introduced at the behest of the IMF. It is they who suffer most from the axing of subsidies on staple foods. It is they who cannot afford the health and education fees now introduced. Today - in a continent which made progress for decades after colonialism - infant mortality, malnutrition and illiteracy are rising to scandalous levels.

That is the baseline by which the policy details debated by Clare Short and Ed Mayo must be judged. St Martin's Church on Saturday may not have seemed the best place for Mr Mayo to begin to pick holes in the detail of what the British Government seemed to be offering. But had the activists there known that, in the end, fine words were all that the weekend would offer, Clare Short might not have even raised the more muted applause which eventually marked her departure.

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