Yes, it is our fault

Children are dying because Western banks won't cancel Third World debt, says Paul Vallely

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omeone took a photograph, but it wasn't me. Otherwise I would show it to you. But I can remember her standing there, stiff for the camera, after having patted her hair in place and straightened her uniform. It was a nurse's uniform, thin and threadbare but clean. Her name was Alice.

Alice is the reason why I put on my "Drop the Debt" T-shirt and went to wave a placard, in a portly unironic echo of my student days, on Waterloo Bridge last weekend. She is the reason I spent 14 uncomfortable hours on Friday on a coach from London to Cologne to protest yesterday outside the G8 meeting as the leaders of the industrialised world gathered to discuss proposals to alleviate the $200bn Third World debt mountain.

Alice is a woman I met in a shanty town in Zambia last year. She and her children were surviving on a single donated bowl of maize porridge a day. "Life is hard," she told me, with devastating understatement. "Five years ago we could afford bread and eggs for breakfast, fish or meat at lunch, and vegetables for dinner. Now we have none of that, not even a cup of tea before bed."

Her three children were all older than they looked: nearly half all African children are so malnourished that their growth is stunted, as are their brains. Infant mortality is rising: one in five of the babies around me in that Lusaka township would die before the age of five.

One of Alice's neighbours, David, had a daughter who was sick. He could not take her to the clinic because he was, like most people in the shanty, unemployed and couldn't afford the recently introduced hospital fees. What was his greatest worry? He paused to think. "That I won't have the money to buy a coffin," he said finally.

Government spending on food subsidies, health and education have all been cut at the behest of the International Monetary Fund, whose policies are designed to restructure Zambia's economy to free up cash to pay off debt. Other gaunt women and men in the world's poorest nations would tell a similar story.

Of course, these Africans have only themselves to blame, you hear people say at smart dinner parties nowadays. Africa is a morass of waste and corruption. If we forgive the debts, they'll just run up more.

Such remarks are based on ignorance, and an eagerness to find any excuse not to face the fact that children are dying to transfer money from the poor world to the rich. (The net flow of capital between Europe and Africa is not in the direction most people suppose: for every pounds 1 we give them in aid we take pounds 3 in debt repayments.) The truth is that all the corruption in Africa - substantial though it is - is paltry in comparison with the problems caused by protectionist Western trade barriers and spiralling prices for Third World commodities.

Many played a part in the build-up of Third World debt. The ideologues of the Thatcher and Reagan era abolished the bank regulations which could have prevented its growth. Greedy Arab cartels hiked up oil prices in the 1970s and then deposited their massive profits in Western banks. The bankers, desperate to move on the cash, lent recklessly - without making the simple checks they would demand if you wanted to borrow the money to buy a car. Arms dealers engaged in what they called "missionary activity" to entice virgin Third World purchasers to spend their new-found wealth. Corrupt African elites stole money and stashed it in their private accounts, often in the same banks which were doing the lending.

What did the money go on? In the early years much went to pay the higher prices for their oil imports. Around a quarter went on military spending. About 20 per cent was stolen by kleptocrat leaders like Mobutu and Marcos. But the vast bulk of the ever-growing debt is merely accumulated interest: as the years passed, and interest rates soared, poor countries became unable even to cover the minimum payments and the totals mushroomed.

So it was great, then, to hear that G7 finance ministers agreed last weekend to write off $50bn of the debt, wasn't it?

No, actually, it made me angry. There was all the usual talk about "debt- to-export ratios" and "net present value", though revealingly the financial data on which it was all based was conveniently not released. There were helpful calls to the policy departments of aid agencies from Gordon Brown's spin-doctors explaining how well the Chancellor had done, with the softly spoken caveats that, of course, the deal was not final and that the heads of government when they met yesterday could, of course, row back on it. Even so the spin merchants were collectively presenting the outcome as a triumph which marks the beginning of the end of the debt crisis.

This is bunkum. For if you asked the PR folk what difference the deal would make to women such as Alice, the answer, if they were truthful, would be "almost none at all". This week's proposed reform would save a country such as Tanzania a mere $16m on a total debt annual repayment bill of $250m. The world's poor are being offered what Oxfam's policy officer, Kevin Watkins, calls "the familiar G7 cocktail of empty promises and over-hyped half-measures".

Think of Third World debt as if it were a pounds 60,000 mortgage on your house. Then suppose you were made redundant and could find only a much lower paid job (which is the equivalent of what has happened to poor nations thanks to the steady fall in commodity prices). Your building society might then say "OK, just pay half your previous mortgage payments for the time being". With a struggle you can manage, though it means less fresh fruit for the kids, and certainly no new shoes. In effect you would be servicing the debt on pounds 30,000 while the lender set the other half of your loan on one side, where it would accrue extra interest until you got a good job again.

But suppose you can't find one? Even if the building society generously announces it will write off the extra accrued interest, what difference does it make to your monthly family budget? Answer: none at all. Your paper debt has changed. But your real income and outgoings are the same. There would be no more money for more food or shoes for the kids each month.

This is what Africa is this week being offered. What makes debt a moral issue is that children are dying directly because of our foot-dragging. In a village in rural Zambia I came across the parents of an eight-month- old baby who had developed malaria. Once the hospital was free but now it took her parents two days to raise the 3,000 kwacha for hospital fees. Eventually they collected it by going round relatives and friends and then walked for three hours to the hospital. The father raced ahead and was standing at the hospital gate, with a medic, as his wife arrived carrying the tiny baby. The child died in her mother's arms at the hospital gate. Three thousand kwacha is 74p.

That was one child: another 11,000 die every day from easily preventable poverty-related diseases in the heavily indebted countries. Yet they almost all spend more servicing debt than they do on primary health care and education combined.

Nothing will change for Alice so long as financial data are the G8's sole yardsticks. Instead of calibrating "debt-export sustainability thresholds" we should be monitoring the impact of debt on children. But the sad truth is that the G8 is more concerned with rearranging the books to balance the bottom line in their national budgets.

Whatever the politicians' PRs say, Alice will not be better off until money is diverted directly from debt repayments into health and education - with strict conditions to avoid the cash going on arms or into some corrupt leader's bank account.

There was something else about Alice. There are many people to blame for the debt - Western monetarists, reckless banks, corrupt African leaders - but the one person not to blame was this ordinary woman in her shabby shanty. That is why debt is not a charity issue, but a justice one. Yet despite all this, despite the lamentable way in which her fellow human beings failed Alice, every day she proudly put on her uniform and went to work in a feeding programme for 185 of the area's most malnourished children. There was no pay. But just because others had not kept their side of the bargain was no excuse for Alice. She did what was her duty.

I thought of Alice last week on Waterloo Bridge. I thought of her again yesterday outside the G8 meeting in Cologne. And if Tony Blair does not show the same moral indignation and resolve on debt that he showed over the situation in Kosovo, I will carry on thinking of her as I turn up, along with all of the others, to protest somewhere else. Alice will not give up. And neither will I.

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